Netflix (NASDAQ:NFLX) is slated to report its second-quarter results on July 16. While many companies decided not to give forecasts for the next quarter, Netflix decided to give it a shot. However, the company did warn that its predictions could miss wildly given the increased level of uncertainty caused by the COVID-19 pandemic.

Still, the overall outlook is positive as people consume more in-home entertainment while staying indoors and social distancing. With coronavirus cases surging in some states in the U.S., and the threat level still high globally, Netflix should continue to experience increasing subscriber growth.

Netflix streaming on various devices.

Netflix is expecting to add 7.5 million subscribers in the second quarter. Image source: Netflix.

Will Netflix experience stranger things this quarter?

Stay-at-home orders around the world caused a surge in demand for in-home entertainment, and Netflix benefited from that trend. In its first quarter, it reported an increase of 15.8 million subscribers. Moreover, the company expects this increase of appetite for its product to continue. When it reports next, it's expecting to have added 7.5 million subscribers. In a letter to shareholders in regards to its second-quarter forecast, the company said:

"Given the uncertainty on home confinement timing, this is mostly guesswork. The actual Q2 numbers could end up well below or well above that, depending on many factors including when people can go back to their social lives in various countries and how much people take a break from television after the lockdown."

Additionally, what will be interesting to observe is the average revenue per user (ARPU). As of its most recent report, Netflix has a total of 183 million subscribers who pay an average monthly fee of $10.87. Importantly, the company has over 100 million subscribers outside of the U.S., and it has a policy of not hedging its foreign currency risk, which means a portion of its revenue is affected by movements in foreign currency exchange rates. Therefore, when the dollar appreciates against other currencies, it hurts the company's overall revenue. Since it last reported, the dollar has depreciated against other major currencies, which should provide a boost to total revenue and ARPU.

Finally, the company's cash flows are benefiting because stay-at-home orders meant it stopped producing new content -- conserving cash. In the near term, this is a strong positive, because its competitors are not creating content either. These disruptions caused by the COVID outbreak led the company to adjust its full-year free cash flow outlook to negative $1 billion. That's improved from the initial expectations of a negative $2.5 billion to a negative $3.5 billion range.

It will be interesting to hear what the company has to say about the state of content creation going forward and how long this current environment can go on. Can it continue acquiring millions of new subscribers while at the same time dramatically reducing content spend? 

What this means for investors

The uncertainty resulting from the COVID-19 pandemic makes this quarterly report especially important. In normal times, companies come pretty near to hitting the forecasts they predict. But these are anything but normal times, and results can be significantly different from what's expected. Investors should be prepared for higher-than-usual volatility in Netflix's stock price after it reports earnings.