Netflix Shares Fall After Streaming Service Reports Lower Than Expected Subscriber Numbers

According to Netflix they added 670,000 new subscribers in the United States but miss the expected 1.2 million subscribers. Unfortunately it had added 5.2 million new members, the same as in Q2 past year, and a significant double digit percentage lower than the expected 6.2 million new members. Currency had a +$65 million impact on worldwide revenue year over year (+13% global ASP growth on a FX neutral basis), but this positive impact was smaller than we had forecast 90 days ago as the U.S. dollar strengthened meaningfully against many currencies since our Q1'18 earnings report in April.

Boosted by the success of its original shows such as "13 Reasons Why", "House of Cards" and "Orange is the New Black", Netflix had beaten subscriber growth expectations in seven out of last 10 quarters.

Shares of Netflix Inc headed for their worst day in two years on Tuesday, falling as much as 14 percent after reporting a surprise shortfall in new subscribers in a quarter marked by the lack of a blockbuster new show and World Cup soccer.

Analysts had expected 79 cents on revenue of $3.94 billion. Second-quarter revenue was $3.91 billion, which was slightly lower than the $3.94 billion predicted by analysts.

The subscriber numbers failed to meet analyst expectations.

In its trying-hard-to-be-positive letter (PDF) to shareholders, Netflix said that it had "a strong but not stellar Q2, ending with 130 million memberships".

Still, Netflix ended Q2 with 130.1 million global subs, up 25% year over year, with 56 million in the USA and 72.8 million elsewhere.

Revenue in the three months ended in June rose to $3.9 billion, yielding earnings per share of 88 cents.

The Silicon Valley-based company noted that it is beginning to "lead artistically" in some categories with its original content, earning enough Emmy nominations this year to break a 17-year top-spot streak by HBO. It had projected the addition of 6.2 million subscribers in the quarter, but it managed to get 5.2 million instead.

Walt Disney is hoping to close on a deal to buy prized entertainment franchises from 21st Century Fox to feed into a video streaming service Disney will debut next year.

Netflix said Monday that it expects more competition, but dismissed any potential negative impact on its business.

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

  • Jacqueline Ellis