After five straight quarters of meeting or exceeding analyst expectations for subscriber growth, Netflix finally fell short, disappointing Wall Street.
The Los Gatos, Calif., company added 670,000 subscribers in the USA and 4.47 million subscribers internationally - well short of the 6.2 million Wall Street expected.
Membership in the quarter grew 5.2 million to a total o 130 million, matching the same period previous year but a million shy of what Netflix forecast, according to a letter released along with earnings figures. It marked the first time in a more than a year that Netflix hadn't exceeded its subscriber growth projections.
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Netflix shares dropped 14.11 per cent to US$343.97 in after-market trade, in a setback to the television juggernaut operating in some 190 markets around the world.
For the three months ending on June 30, Netflix reported revenue of $3.9 billion and earnings of 85 cents a share - touching analyst estimates of $3.94 billion in revenue and beating projections of $0.79 per share. Internationally, the company added 4.47 million subscribers, versus the 5.11 expected.
Netflix also shared guidance of 5 million new subscriptions for Q3, which came in below analyst estimates of about 6 million.
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"We had a strong but not stellar Q2 (second quarter)", Netflix said in a letter to shareholders.
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. Its total base of 57 million subscribers in the USA dwarfs Hulu's 20 million users and HBO's 5 million.
They're also anxious about the amount of cash Netflix might spend this year - up to $4 billion by J.P. Morgan estimates - and the pace of subscriber growth. Revenue rose 5.6 percent, to $3.91 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.
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In the letter to shareholders, Netflix said it expected more competition from global players including ProSiebenSat 1 Media in Germany and on-demand service Salto in France. And Walt Disney is hoping to close on a $71 billion deal to buy prized entertainment franchises from 21st Century Fox to feed into a video streaming service Disney will debut next year. "Our strategy is to simply keep improving, as we've been doing every year", the company said.