Check out the key takeaways from Netflix’s Q2 2024 earnings call. In particular, you should pay close attention to the streaming giant’s AI plans.
Media streaming veteran Netflix (NFLX -1.51%) reported its second-quarter results on Thursday, July 10. The results were consistently slightly above management’s expectations, beating Wall Street consensus estimates across the board.
As always, numbers don’t tell the whole story. Netflix management made some revealing comments during its second-quarter earnings call, and investors should pay attention to these potentially game-changing developments.
Some tasty tidbits about Netflix’s financial results
The 42-minute call had far too many highlights to cover them all in one short article, but a handful of details stood out:
- Ad-based subscription plans are paying off, although it will take time for this young advertising company to generate significant revenue.
- India’s spectacular growth is not the result of the unique qualities of this market. Rather, it is an encouraging example of the broad growth trends observed around the world, amplified by the scale of the Indian economy.
- And it’s not just your imagination: Netflix is really pushing its video games in a big way right now. With over 100 games currently available and 80 more in development, Netflix is capitalizing on this significant business opportunity with original games based on its exclusive shows, like Squid Game And Emily in Paris.
That’s a useful and colorful commentary on Netflix’s recent successes. But one part of this earnings call particularly caught my attention.
The main event: Netflix’s evolving use of AI technology
Netflix has always included machine learning and other forms of artificial intelligence (AI) in its services, but the company is now seriously looking into generative AI.
Co-CEOs Greg Peters and Ted Sarandos spent about a tenth of the conference time discussing the company’s plans to leverage AI-generated content. They’ve tended to mention generative AI on every earnings call in recent years, but the discussion is getting deeper and more detailed.
Peters noted that Netflix has long used AI and machine learning to drive content discovery and engagement. “We believe generative AI has enormous potential to further improve our recommendations and discovery systems,” he said, highlighting how the technology can make it easier for users to find the content they love.
For example, imagine a user interface in which machine learning systems dynamically organize and personalize the home screen based on the user’s viewing habits, current trends, and even mood indicators based on recent activity. The resulting presentation of content choices is fed to a generative AI engine for finishing touches, adding a personalized touch to the user’s interactions with the viewing platform.
This could result in more accurate and engaging content suggestions, such as recommending a light comedy after a series of intense dramas, all presented to the viewer with unique descriptions and other AI-powered optimizations.
Balancing AI tools with human creativity
Sarandos went on to emphasize that AI will serve as a tool to assist creators, not replace them. He compared this to the evolution of animation, where technology has improved quality rather than reduced costs.
“AI is going to create a tremendous set of tools for creators, a great way for them to tell better stories,” he noted. “And one thing is for sure, if you look back over a hundred years of entertainment, you can see how great technology and great entertainment work together to create great businesses.”
According to Sarandos, the success of content lies in its ability to connect with the audience through strong writing, acting and storytelling. AI can enhance these elements and help humans create them, but the focus remains on the quality of the storytelling.
As filmmakers and producers experiment with AI, Netflix is committed to using these advances to support, not replace, creative processes. This balance of technology and human creativity allows Netflix to continue to deliver high-quality, engaging content. The company can use generative AI engines to drive viewer engagement and satisfaction in multiple ways, and a more engaged audience is ultimately good news for Netflix investors.
This earnings call revealed more than just impressive numbers. Netflix’s strategic focus on artificial intelligence, innovative content and global growth underscores its commitment to staying ahead in the highly competitive streaming media industry.
As Netflix continues to improve its user experience and expand its market reach, investors have plenty of reasons to remain optimistic about the company’s future. The stock is flirting with all-time highs, and for good reason.