Netflix reports weaker-than-expected new subscriptions in the second quarter

Posted July 18, 2018

While Wall Street remains overwhelmingly positive on Netflix and its role in video streaming globally, the second quarter figures did raise question marks over future growth and six brokerages cut their price targets on the company's shares.

Last night it was revealed in NY, that Netflix added 5.2 million users in the second quarter, about a million fewer than the company predicted.

The streaming giant reported overall membership growth was 5.2 million - the same as the second quarter a year ago - but was lower than its forecast of 6.2 million. Netflix, based in Los Gatos, California, didn't specify why it fell short last quarter, beyond citing the difficulty of forecasting growth in 190 countries around the world. The company's stock was down more than 13 percent in early after-hours trading in response to the news.

Netflix's second-quarter revenue also came in short of projections. Worldwide Netflix added 4.47 million subscribers below the 5 million predicted.

In a letter to shareholders, Netflix acknowledged the miss: "We had a strong but not stellar Q2", the statement said.

Despite the subscriber miss, the company's second quarter revenue was $3.9 billion USA and its net income was $384 million U.S., up from last year's second quarter net income of $66 million.

Netflix Inc. stunned Wall Street by attracting fewer subscribers than expected last quarter, renewing concerns that the video-streaming service has become an investment bubble. That compares with consensus estimates for 1.2 million and 5.04 million, respectively.

As of June 30, Netflix had 130 million subscribers, including 57.4 million in the US.

"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. Revenue climbed 6 percent to $3.9 billion. It seemed those dollars were paying off, when the platform received 112 Emmy nominations for its own content, breaking HBO's 17-year streak of dominating the categories. Walt Disney plans to launch a rival streaming service in 2019.

Netflix said Monday that it expects more competition, but dismissed any potential negative impact on its business. "Our strategy is to simply keep improving, as we've been doing every year in the past".