Published: Tue, July 17, 2018
Culture&Arts | By Hattie Nash

Netflix misses its predicted new subscribers by a million

Netflix misses its predicted new subscribers by a million

United States net adds of 0.7m (vs. guidance of 1.2m) were down vs. last year's Q2-record 1.1m, but consistent with previous Q2 performance (0.5m in Q2'12, 0.6m in Q2'13, 0.6m in Q2'14, 0.9m in Q2'15, and 0.2m in Q2'16).

Netflix also fell short when it came to revenue predictions. Heading into earnings, the company said it had added 7.4 million new customers overall in the first quarter and the company was projecting to add another 6.2 million this quarter.

Almost $23 billion was wiped off the value of Netflix last night after it missed subscriber growth and revenue forecasts for the second quarter.

Shares of Netflix, which have more than doubled since the start of the year, dropped by around 14 percent in after-hours trading.

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Despite its second-quarter misfire on subscriber growth, the Los Gatos, California, company reported earnings that beat analyst estimates.

The Los Gatos, Calif., company added 670,000 subscribers in the USA and 4.47 million subscribers internationally - well short of the 6.2 million Wall Street expected. "As we head into the rest of 2018, we believe Netflix has a number of growth levers which should fuel the company's next phase of strategic penetration among both USA and especially global consumers despite some softness seen in 2Q", he wrote.

Netflix said it made a profit of $384m on revenue of $3.9 billion in the recent quarter, compared to net income of $66m on $2.8 billion in revenue the same time previous year. Analysts surveyed by Zacks had expected revenue of $4.14 billion.

Moving forward, Netflix forecasts a total revenue of US$3,988 million for Q3 18.

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"The quarter is a reminder that Netflix's cadence of net adds is not linear, but lumpy in nature", said Justin Patterson, an analyst with Raymond James and Associates in San Francisco, while pointing to the absence of a new hit series as a driver.

And if you've noticed more billboards for "Stranger Things" and "The Crown" of late - two shows that helped make Netflix the most-nominated network for the Emmys last week - there's a good reason.

At the same time, Netflix faces growing competition. The company also said "HBO and Disney are evolving to focus on internet entertainment services", while Amazon and Apple are investing in content as part of larger "ecosystem subscriptions".

"Our strategy is to simply keep improving", Netflix said.

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