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After Hours: Netflix, IBM, and eBay Deliver Q2 Results

Eric Volkman, The Motley Fool

As even casual stock market watchers could have predicted, today's after-hours trading is being dominated by companies releasing fresh quarterly results. There was a pack of them today, among which were market mainstays Netflix (NASDAQ: NFLX), IBM (NYSE: IBM), and eBay (NASDAQ: EBAY).

Some of these stocks are ratcheting up higher in post-market trading thanks to earnings beats, while others, well...

The exterior of Netflix's Los Angeles headquarters

Image source: Netflix.

Netflix's Q2 subscriber count miss

Netflix shares are taking a big hit after hours. In fact, the company's stock is by far the biggest decliner out of all major issues tonight. It's sliding by almost 11% as of this writing.

The problem is the company's disappointing Q2 results, which were reported just after the closing bell. For the quarter, Netflix's crucial subscriber additions fell well short of both its own and analysts' expectations. All told, 2.7 million new subscribers came to the platform in Q2 -- the company had anticipated 5 million, while analysts were modelling roughly 5.3 million.

The fundamentals looked a little better. Netflix's revenue was just over $4.9 billion, which was 26% higher on a year-over-year basis, broadly meeting analyst projections. And although GAAP net income declined by 29% to $271 million, or $0.60 per share, it still exceeded the average prognosticator estimate of $0.56.

But subscriber count is everything with Netflix, so the significant whiff is really affecting investor sentiment. The company attributed the lower-than-expected figure mainly to a relative dearth of fresh content, combined with a "pull-forward" effect from its big 9.6 million subscriber addition figure in Q1. That content theory is a bit hard to accept, given the nearly constant rollout of new series and films, though. 

Improvement is expected this current quarter, however. Netflix is anticipating that it will add 7 million subscribers during the period and post revenue of $5.25 billion and per-share net earnings of $1.04.

IBM's Q2 shows continued revenue decline

Another decliner in after-hours trading this evening is IBM, down slightly following the after-market release of Q2 results.

For the quarter, IBM took in revenue of nearly $19.2 billion. That was 4% below that of Q2 2018 and is in character for a company that has posted declines in most quarters this decade. The news was better on the bottom line, in which IBM saw non-GAAP (adjusted) net profit basically flat-line at $2.8 billion, or $3.17 per share. 

Both figures eclipsed the average analyst estimates, which were for $19.17 billion in revenue and $3.08 in per-share net profit.

The company attributed much of the latest revenue slide to the company's legacy hardware businesses. It has lately pivoted to cloud computing products, a segment that has grown for it, but other areas such as hardware are acting as a drag on the top line. 

Judging by the after-market reaction to IBM's results, investors would like to see the company shake off those legacy operations and move more boldly into the future. If the company could start reversing the revenue declines in a consistent manner, it would greatly help investor sentiment.

eBay's solid Q2 results

Finally, in big corporate results news, we have eBay. The durable auction and sales e-tailer delivered Q2 fundamentals after the closing bell that, unlike Netflix and IBM, satisfied the market.

eBay's net revenue for the period was $2.69 billion, a 2% year-over-year increase. Adjusted net income was $589 million, or $0.68 per share, for an 11% improvement. Analysts had been modeling $2.68 billion on the top line and EPS of $0.62.

The company adjusted its guidance for the entirety of fiscal 2019, largely on the back of these results. It now expects that revenue will land between $10.75 billion and $10.83 billion, for annual growth of at least 2%; that range was lower than the previous projection of $10.83 billion to $10.93 billion. On the other hand, the annual EPS estimate was raised to $2.70 to $2.75; it was formerly $2.64 to $2.70.

eBay is riding a wave of high consumer confidence and a still-thriving economy. It's also benefiting from its years of experience and solid market position as an online auction house.

In after-hours trading tonight, eBay stock is rising by almost 6%.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool is short shares of IBM and has the following options: short January 2020 $200 puts on IBM, short October 2019 $37 calls on eBay, long January 2021 $18 calls on eBay, short September 2019 $145 calls on IBM, and long January 2020 $200 calls on IBM. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.