Netflix shares fall on missed user numbers

David Murphy

Netflix has announced disappointing second quarter results, missing its own new subscriber forecasts by  a million. The company’s shares fell by 14 per cent to $346.05 (£261.30) in after-hours trading in New York as analysts reacted to the news. Despite missing its subscriber targets, the company posted a second quarter profit of $384.3m, compared to $65.6m in Q2, 2017. Streaming revenues for Q2 rose 43 per cent year-on-year.

In a letter to shareholders, the company said it had a “strong but not stellar Q2, ending with 130m memberships,” and admitted that while it had had 5.2m new members, this figure was lower than its 6.2m forecast. In the US, the company added 670,000 streaming customers, against a forecast 1.2m.

Paul Verna, principal analyst at eMarketer, said the results were disappointing, but that the company remains in good shape.

"After four consecutive quarters of beating its own guidance, and analysts’ expectations on key metrics such as revenues, profits, and subscriber gains, Netflix disappointed with a weak Q2 2018,” said Verna. “This 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. The market is also heating up with new entrants in the SVOD space, including Disney and AT&T.

"Despite the weak quarter, and a lowered outlook for Q3, eMarketer expects Netflix to remain the clear leader among video 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. This is critical in an era when people increasingly choose streaming services on the strength of their content."

eMarketer expects Netflix to have 147.5m individual users in the US this year, 11 per cent up on last year, and equating to almost 74 per cent of US OTT video users. Worldwide, eMarketer expects Netflix to have 332.5m individual users this year, almost 21 per cent up on last year. These figures assume roughly 2.5 viewers for every one paid Netflix subscription.