Published: Tue, July 17, 2018
Life&Culture | By Rose Hansen

Netflix Shares Crash After New Subscriptions Fall Short of Expectations

Netflix Shares Crash After New Subscriptions Fall Short of Expectations

Following the announcement, the stock was down about 14% at $346.00 in Monday's after-hours session.

The streaming service that has ventured in recent years into original productions, such as The Crown, House of Cards and Stranger Things, reported a profit of $384.3 million, or 85 cents a share, up from 15 cents a share the previous year.

In the third quarter, Netflix expects to add 5 million subscribers - 650,000 in the United States and 4.35 million internationally.

The company said it added 670,000 streaming customers in the USA, below its guidance of 1.2 million new subscribers.

Revenue: $3.91 billion. Analysts were expecting $3.94 billion. Internationally, the company added 4.47 million new subscribers, short of its guidance for 5 million.

Analysts had been modeling $3.94 billion in revenue and EPS of 79 cents.

"We had a strong but not stellar Q2 (second quarter)", Netflix said in a letter to shareholders. For the first time, Netflix generated more revenue outside the U.S.: global revenue totaled $1.92 billion and U.S. revenue was $1.89 billion for Q2.

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The overly optimistic projections were "pretty broad across multiple markets", Chief Financial Officer David Wells said on a post-earnings webcast.

Netflix said it had "over-forecasted" quarterly fluctuations in the pace of new customers.

Netflix executives expressed little concern on a call with analysts and investors, insisting their growth over the past 12 months has still exceeded expectations. That's less than the $608 million it spent in the same quarter in 2017, but the cash burn keeps the company on track to blow through as much cash as J.P. Morgan was forecasting they would this year. While most of the company's revenue growth comes from worldwide markets, the vast majority of its costs remain dollar-denominated. Ives expects Netflix to pour another $10 billion into its video mix next year.

Netflix cited an array of competitors, starting with YouTube.

Apple, the world's most valuable company, is spending about $1bn on original programming for a video service of its own.

Meanwhile, cable distributors are offering smaller and cheaper bundles of channels.

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.

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