Netflix stock tumbles after earnings show decline in paid U.S. subscribers

By Christopher Zara

Have we reached peak TV or just peak Netflix?

The video-streaming giant reported its second-quarter earnings this afternoon, and the results are less than stellar. Net global subscribers grew by only 2.7 million, far below its guidance of 5 million. Even more shocking, Netflix saw a decline of 126,000 paid domestic subscribers during the last three months. That’s compared to an expected increase of 352,000 subscribers, according to an estimate cited by CNBC.

Shares of Netflix were down 10.47% in after-hours trading.

Here are the key numbers:

    Revenue: $4.92 billion (compared to $3.91 billion last year)

    EPS: 60 cents (compared to 85 cents last year)

    Y/Y growth: 26% (compared to 40.3% last year)

    Global streaming paid subscribers: 151.56 million

In a letter to shareholders, Netflix CEO Reed Hastings conceded that subscribers were not exactly flocking to see what it had to offer in the last quarter. “We think Q2’s content slate drove less growth in paid net adds than we anticipated,” he wrote.

He also said price hikes were likely a factor for the lower-than-expected numbers, which were slightly worse in regions where prices rose. “We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2,” Hastings wrote.

Subscribers are the most closely watched metric for Netflix and seen as a barometer of the rapidly growing company’s health. Netflix said it expects to grow by 7 million paid memberships in the third quarter, more than the 6.1 million during the same period a year ago. For its next report, the company’s numbers will likely be aided by the third season of Stranger Things, which was released just after the end of Q2.

Some analysts believed Netflix would see solid growth from users joining the service in anticipation of the show’s premiere, but that turned out not to be the case.

We’ll have more on Netflix earnings after the call this afternoon. Stay tuned . . .


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