Netflix has fallen well short of subscriber growth targets for the second quarter of 2018 - sending the streamer's stock down more than 14 per cent in after-hours trading on fears its pace of expansion is slowing down.
On Monday the company reported 670,000 streaming net adds domestically and 4.47 million internationally. Wall Street analysts had expected 1.23 million net adds in the US and 5.11 million overseas for the period, slightly higher than Netflix's prior guidance.
"We had a strong but not stellar Q2," Netflix executives wrong in their quarterly letter to shareholders.
"This Q2, we over-forecasted global net additions... as acquisition growth was slightly lower than we projected."
Netflix also provided third quarter guidance that was below analyst forecasts.
For Q3, it projects 650,000 subscriber net adds in the US and 4.35 million overseas. That's compared with analyst estimates that Netflix would have Q3 net adds of 947,000 in the US and 5.05 million internationally.
In a post-announcement interview hosted by Netflix, company execs essentially said they didn't know why subscriber growth in the quarter was lighter than expected.
"We've seen this movie of Q2 [subscriber net adds] shortfall before, about two years ago in 2016 -- and we never did find the explanation to that, other than there's some lumpiness in the business," CEO Reed Hastings said, adding that Netflix "continued to perform after that."
Meanwhile, CFO David Wells said he didn't think Netflix's broad price increases over the course of 2017 had an impact on subscriber growth.
The miss on subscribers for the second quarter "isn't entirely surprising," according to eMarketer principal analyst Paul Verna, as rivals including Amazon, Hulu, and HBO are gaining share of the subscription-video market at Netflix's expense.
Despite the "near-term gut punch," Netflix is still well-positioned for future growth, GBH Insights analyst Daniel Ives wrote in a note.
"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 US and especially international consumers despite some softness seen in 2Q," he wrote.
Netflix reported Q2 revenue of $US3.91 billion, up 40 per cent year over year, and earnings per share of 85 US cents (versus 15 US cents in the year-ago quarter). Wall Street consensus Q2 2018 estimates were for $US3.94 billion in revenue and EPS of 79 US cents.