Netflix shares plunge in after-hours trade after forecast miss

Roman Schwartz
July 17, 2018

The company expected to hit 5.11 million subscribers globally and 1.23 million subscribers domestically, but it actually hit 4.5 million and 700,000, respectively.

Chief Executive Reed Hastings, in a letter to shareholders, called it a "strong but not stellar Q2". Analysts had projected revenue of $3.94 billion.

The streaming company said it had added 5.2 million subscribers in the three months to June 30, below analyst forecasts for 6.3 million subscribers and its own expectations.

Cash burn - something Netflix has been reducing for the past few quarters - also had a noticeable uptick. Wall Street consensus Q2 2018 estimates were for $3.94 billion in revenue and EPS of 79 cents.

Subscriber additions: 5.1 million total - 670,000 in the U.S. and 4.47 million internationally. Analysts were expecting 6.3 million - 1.2 million in the USA and 5.1 million internationally, according to Bloomberg.

Netflix is facing growing competition from global tech rivals and traditional providers
Image Netflix is facing growing competition from global tech rivals and traditional providers

Membership in the quarter grew 5.2 million to a total of 130m, matching the same period previous year but a million shy of what Netflix forecast, according to a letter released along with earnings figures. All told, Netflix now boasts upwards of 130 million subscribers across the globe.

"After handily blowing away Street expectations on subs the last few years this is a clear speed bump for Netflix as the worldwide miss was most concerning given this is the linchpin to the core growth thesis for the coming years", he said in an email.

AT&T just bought Time Warner for $81 billion in a deal that includes HBO - a pay TV and video streaming service that AT&T plans to expand in an attempt to lure more viewers away from Netflix. Ives expects Netflix to pour another $10 billion into its video mix next year.

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".

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