Netflix Inc's subscriber growth and forecast fell short of Wall Street expectations, sending shares of the normally high-flying stock crashing 14 percent on Monday.
The California-based company added 670,000 net subscribers in the US, far below the 1.19 million net additions expected by analysts polled by Thomson Reuters. 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.
On Wall Street, the slowdown is raising questions about whether Netflix can sustain the rapid-fire growth that has made it one of the hottest companies in tech, especially as bigger players crowd its turf.
"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. This sent Netflix shares tumbling 12.6% (at time of this posting) in after-hours trading.
Revenue: $3.91 billion. Analysts were expecting $3.94 billion.
The company gained 5.1 million subscribers worldwide during the quarter, more than 1 million below the number that management had believed it could.
However, GBH Insights saw the Netflix subscriber forecast miss as a "speed bump", rather than start a downward trend, reasoning that the "content arms race continues to be a major tailwind" for the company.
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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".
Netflix reported 674,000 domestic subscriber additions, lower than the 1.23 million expected.
Some investors have seen Netflix as the future of television-a sure-to-be dominant hub for all our entertainment viewing.
Total streaming revenue for Q2 18 is US$3,814 million, up from US$2,671 million during the same period a year ago.
The Silicon Valley based company said 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. Walt Disney plans to launch a rival streaming service in 2019.
Netflix cited an array of competitors, starting with YouTube. "Our strategy is to simply keep improving, as we've been doing every year in the past".