Netflix missed its target for new subscribers in the second quarter, sending shares down more than 14 per cent in after hours trading overnight.
The streaming service added 5.1 million new users in the period from April to June, but had been targeting more than six million. It is the first time in more than a year that Netflix has failed to exceed expectations when it comes to subscriber growth.
The company posted revenue of $3.91bn (£2.95bn), an increase of 40.2 per cent compared with the second quarter of last year, but below analysts’ expectations of $3.94bn. Earnings per share beat forecasts of 79 cents, coming in at 85 cents.
In a letter to shareholders, Netflix said: “We had a strong but not stellar Q2, ending with 130 million memberships. Earnings, margins, and revenue were all in-line with forecast and way up from prior year.
“Internet video is growing globally and we are fortunate to be one of the leaders.”
The company added that it is also “starting to lead artistically in some categories, with our creators earning enough Emmy nominations this year to collectively break HBO’s amazing 17-year run”.
Looking ahead to the third quarter, Netflix said it expects to add five million subscribers. The company also highlighted YouTube, HBO, Disney, Amazon and Apple as its competition.
“Each of these firms has unique content and is striving to find the best creators from around the world to entertain its viewers. There has never been a better time to be a creator or consumer of content. We believe that consumer appetite for great content is broad and that there is room for multiple parties to have attractive offerings,” Netflix said.
The group added that it expects further competition from the combination of AT&T and Warner Brothers, and whichever combination results from the current takeover battle over 21st Century Fox.
Paul Verna, analyst at eMarketer, said the company’s results had disappointed, but added: “This is isn’t entirely surprising given rising competition in the video streaming market, where Amazon, Hulu, HBO and others are gaining share of subscription video dollars at Netflix’s expense.”
Meanwhile, Mr Verna said that despite the weak second quarter and lowered outlook for the third, Netflix is expected to remain the “clear leader” among streaming services in the US.
“Netflix has a strong slate of original content that should keep it in the forefront among streaming services, and it plans to continue outspending the competition to develop TV programming and feature films,” he said.
“This is critical in an era when people increasingly choose streaming services on the strength of their content."
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