TOP STORY
📈 Netflix Well-Positioned For Strike, Q2 2023 Earnings

Kicking off the earnings season, Netflix released its Q2 2023 results this week, marked by surprising growth in the company's subscriber base.

The streaming giant saw nearly 6 million net new subscribers join the platform in the quarter, more than tripling industry estimates. This surge in subscriber growth may be due to Netflix's recent crackdown on password sharing, where they saw days of nearly 100,000 sign-ups in the quarter.

• Revenue: $8.19 billion (vs. 8.29 billion expected) ❌

• Earnings: $3.29 per share (vs. $2.86 expected) ✅

• Subscribers: +5.89 million (vs. 2.1 million expected) ✅

Amid these Q2 results, Netflix finds itself navigating through an ongoing strike in Hollywood. The strike, led by the writers' union (WGA) and the actors' union (SAG-AFTRA), is centered around AI-induced job threats and demands for better streaming service-based work compensation.

While this disruption rattles the streaming industry, Netflix has a unique resilience due to its long pipeline of content and its diversified production network that expands beyond Hollywood.

This advantage is enabling Netflix to maintain a steady content flow for its viewers during a time when competitors grapple with production freezes, adding to Netflix’s outperformance in the sector.

Ironically, these production stoppages may provide a short-term benefit to streaming companies by bolstering their free cash flow.

Netflix increased its free cash flow forecast from $3.5B to over $5B for the fiscal year, attributing this to lower content-related spending caused by industry strikes and shifts in production schedules.

The last major instance of production disruption was during the onset of COVID-19 in March 2020, a period when free cash flow grew among Hollywood conglomerates.

Q2 EARNINGS
⚡️ Tesla Drops 10% on Q2 Earnings Report, Elon Gives Updates

This week, Tesla unveiled its Q2 2023 earnings report, boasting a new record in quarterly revenue. The EV giant exceeded revenue (and earnings-per-share) estimates, reporting $24.93 billion compared to the forecasted $24.47 billion.

Tesla employed price reductions and incentives to enhance consumer accessibility, a move which paid off with stronger-than-expected revenue, but resulted in lower margins.

• Revenue: $24.93 billion (vs. 24.47 billion expected) ✅ 

• Earnings: $0.91 per share (vs. $0.82 expected) ✅

Key Highlights

🚗 Full Self-Driving: Tesla signaled openness to licensing its Full Self-Driving (FSD) software to other automakers, noting that they are already in discussions with one major Original Equipment Manufacturer (OEM).

Additionally, Tesla introduced a "one-time amnesty" for FSD owners, allowing them to transfer their purchased FSD to a new vehicle until September 30th, 2023.

⚡️ Tesla Energy and Services: Tesla's energy business showed strong performance with revenue from energy generation and storage, such as solar installations and backup batteries, jumping 74% YoY to $1.51 billion.

The growth in Tesla's vehicle fleet also resulted in a 47% rise in revenue to $2.15 billion from "services and other" sources, which vehicle repairs and maintenance.

🤖 Tesla Dojo: Elon Musk unveiled Tesla's initiative to invest over $1 billion into developing its AI supercomputer, named Dojo amid a shortage of Nvidia's A100 tensor core GPU clusters.

The supercomputer aims to fill the void created by Nvidia's shortage of GPUs, which are crucial to training Tesla's Full Self-Driving (FSD) software and Optimus humanoid robots.

🛻 Tesla Cybertruck

Elon Musk expressed confidence in the demand for the long-awaited Cybertruck, saying, "Demand is so far off the hook, you can't even see the hook." 

Earlier in the week, in a significant breakthrough, the company built its first Cybertruck at its Austin plant after two years of delays. With an online tracker suggesting over 1.9 million preorders, Tesla is setting ambitious production targets.

After this news, Ford slashed the prices of its competing F-150 Lightning trucks by nearly $10,000.

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STOCK MARKET
📈 The Stock Market is Rebounding, Recession Odds Decrease

Despite concerns over an economic slowdown, the stock market has continued to perform strongly, reflecting confidence in the economy's resilience.

In the U.S., annual inflation slowed to 3% last month, marking the 12th consecutive month of easing inflation. Similarly, Canada recorded a more-than-expected drop in its annual inflation rate to a 27-month low of 2.8% in June, primarily due to lower energy prices.

According to recent insights from Goldman Sachs Research, the probability of a U.S. recession in the next year has been downgraded to 20%, showing increased optimism in the U.S. economy's strength.

Meanwhile, Wall Street executives have been signaling that the worst may be over for the industry. Despite another quarter of disappointing performances, top banking figures have noted improved sentiment and activity, evidenced by “green shoots” that emerged across businesses towards the end of Q2.

This positive outlook on Wall Street’s future, coupled with slowing inflation and reduced recession odds, may be the reason for the stock market’s recent performance.

 FROM THE BLOSSOM APP

🎙 Top Discussions This Week

🗞️ What else you might’ve missed:

• Amazon ($AMZN) plans to bring its pay-by-palm system to all Whole Foods stores.

• Google ($GOOG) is hiking YouTube Premium plans for new users in the U.S.

• Apple ($AAPL) is working on artificial intelligence tools that could challenge OpenAI and Google.

• Canadian port workers withdrew plans to go back on strike.

• Carvana ($CVNA) skyrocketed up 40% after a debt exchange deal.

• Microsoft ($MSFT) plans to offer free tools that can spot cyberattacks.