Economy

Netflix shares plunge due to lower subscriber growth

Netflix shares plunge due to lower subscriber growth

After five straight quarters of meeting or exceeding analyst expectations for subscriber growth, Netflix finally fell short, disappointing Wall Street.

"We had a strong but not stellar Q2, ending with 130 million memberships", Netflix said in a letter to shareholders. Worldwide subscriber growth also fell far short, as Netflix added 4.47 million against an expected 4.97 million.

The streaming company said it had added 5.2 million subscribers in the three months to June 30, below analyst forecasts for 6.3 million subscribers and its own expectations. Analysts surveyed by Zacks had expected revenue of $4.14 billion.

It marked the first time in a more than a year that Netflix hadn't exceeded its subscriber growth projections.

Netflix reported Q2 revenue of $3.91 billion, up 40% year over year, and earnings per share of 85 cents (versus 15 cents in the year-ago quarter).

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Subscriber additions: 5.1 million total - 670,000 in the United States and 4.47 million internationally. All told, Netflix now boasts upwards of 130 million subscribers across the globe.

Netflix said it made a profit of $384m on revenue of $3.9 billion in the recent quarter, compared to net income of $66m on $2.8bn in revenue in the same period previous year.

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. The reason behind this is that Netflix is now has a free cash flow of negative $559 million meaning they once again spent more in the second quarter of 2018 than they made.

Going forward, "We anticipate more competition from the combined AT&T/WarnerMedia, from the combined Fox/Disney or Fox/Comcast as well as from global players like Germany's ProSieben and Salto in France", the company said in the investor letter.