Netflix undershot its own guidance for net added subscriptions in the second quarter, blaming its content slate and other variables rather than new competition or U.S. price hikes.
It delivered 2.7 million new subscribers, well short of its own forecast for 5 million and the 5.5 million it added in the same period of 2018. U.S. subscriber growth, notably, was flat. The streaming giant now has 151.6 million subscribers around the world.
Revenue for the April-to-June quarter came in on target at $4.9 billion, up 26% from the same period a year ago. Earnings per share of 60 cents exceeded the company’s own guidance of 55 cents, and Wall Street analysts’ consensus expectation of 56 cents a share.
Shares plunged more than 13% in after-hours trading after the results were released.
“Our missed forecast was across all regions, but slightly more so in regions with price increases,” the company explained in its quarterly letter to shareholders. “We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region).
“Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated. Additionally, Q1 was so large for us (9.6 million net adds), there may have been more pull-forward effect than we realized. In prior quarters with over-forecasts, we’ve found that the underlying long-term growth was not affected and staying focused on the fundamentals of our business served us well.”
As far as the third-quarter, which includes Stranger Things 3, the company said it expects to add 7 million new subscribers, far better than the 6.1 million it added in the third quarter of 2018. U.S. subscriber levels, it said, will “return to more typical growth” in the third quarter, it added. “Consumers around the world continue to move from linear television to internet entertainment at a remarkable rate,” the letter emphasized.
Debate has continued among analysts and company observers about the ceiling for subscription prices. In the second quarter, the company upped prices in the UK, Switzerland, Greece and Western Europe. The $13 subscription plan in the U.S. is the most popular, and the streaming company has managed to continue growing its subscriber base despite several hikes.
Overall Netflix sentiment on Wall Street has remained largely upbeat in 2019. The company has been viewed as well-protected even as Disney revealed its own streaming launch at just $7 a month; NBCUniversal and WarnerMedia took rights back to The Office and Friends; and Apple prepped Apple TV+.
Hastings, Chief Content Officer Ted Sarandos and other executives are set to gather for a video interview about the results. The interview will be posted on YouTube at 3PM PT.