The company lost about 1 million subscribers in the second quarter, a smaller loss than the 2 million it had predicted would cancel their accounts, helped in part by the launch of a new season of the hit show Stranger Things. But Netflix forecast it would gain 1 million subscribers in the third quarter, a slower recovery than the 1.8 million subscriptions Wall Street analysts had expected. The results come after Netflix spooked investors in April when it revealed its decade-long subscriber growth had ended, raising questions about the value of entertainment companies trying to compete in streaming. The stumble rattled Hollywood and triggered a sell-off in shares of major media groups such as Disney and Warner Bros. Discovery, prompting a tighter approach to TV and film production in recent months. Shares of Netflix rose 7 percent in after-hours trading, but are still down nearly 70 percent since the start of the year. The company has been hit by intense competition, a more saturated U.S. market and its decision to raise prices at a time when consumers are facing soaring inflation. Asia Pacific was the only region where Netflix added subscribers in the three months to the end of June. Netflix gained 1.1 million subscribers in the region, while losing 1.3 million in the US and Canada and 800,000 in Europe, the Middle East and Africa. In a letter to investors on Tuesday, Netflix acknowledged that re-accelerating its growth would be a “big challenge” but defended its status as a “streaming leader.” The company closed the second quarter with 220.7 million subscribers worldwide, putting it well ahead of its competitors. Netflix also boasted that it has more pop culture influence than its competitors, showing higher Twitter volume for Stranger Things than Disney’s Obi-Wan Kenobi TV series or Paramount’s Top Gun Maverick. Netflix outlined plans to jump-start the development, announcing that next year it will introduce a new payment plan for users who share an account. It has vowed to crack down on password sharing, estimating that 100 million households use but don’t pay for Netflix. After casually announcing a volte-face in advertising during its first-quarter earnings call, Netflix offered some details about the strategy.

It said it plans to initially launch a cheaper ad-supported service in a “handful of markets where ad spending is significant” in early 2023. Netflix this week revealed it was working with Microsoft to build that service. “Our hope is to create a better-than-linear TV advertising model that is more seamless and relevant to consumers,” he said. Netflix has not said how much it plans to invest in the new service. Co-founder Reed Hastings previously opposed the ad, fearing it would jeopardize the platform’s reputation as a place where viewers can “chill out” away from the cacophony of ads. Netflix earned $1.4 billion in net income on $8 billion in revenue during the quarter. It said a stronger US dollar resulted in $339 million in revenue. It posted earnings per share of $3.20, above analysts’ expectations of $2.96. Netflix makes almost 60 percent of its revenue outside the US, leaving it with “high exposure” to currency fluctuations.