Subscriber Growth is Slowing Down for Streaming Giant Netflix

Shares of Netflix were falling as much as 11% in after-hours trading on Tuesday after the company reported a big miss in its subscriber numbers in Q1.

Global paid net subscriber additions were only 3.98 million compared to the 6.2 million expected, per FactSet. The company also said it only expects to add about 1 million subscribers in the current quarter.

The company cited that the slow down in numbers may be due to the ongoing pandemic, which forced the streaming giant to delay some big name shows and films.

The company said in its report that it doesn’t believe competition played a factor in the weak subscriber numbers. “We don’t believe competitive intensity materially changed in the quarter or was a material factor in the variance as the over-forecast was across all of our regions,” according to the report.

“We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays,” Netflix said in its letter to shareholders.

Despite this miss, the company saw revenue grow 24% YOY, coming in line with its beginning of the quarter forecast.

For the quarter, Netflix reported earnings per share of $3.75. This was in comparison to the $2.97 per share expected by analysts according to Refinitiv. Revenue at $7.16 billion was better than the $7.13 billion expected, per Refinitiv.

Netflix anticipates its content to pick back up later in the year.

“As we’ve noted previously, the production delays from Covid-19 in 2020 will lead to a 2021 slate that is more heavily second half weighted with a large number of returning franchises,” Netflix said.

The company is expecting to spend more than $17 billion in cash on content this year.

“We’ll test many things, but we’ll never roll something out that feels like turning the screws,” Co-CEO Reed Hastings said in the company’s post-earnings interview. “It’s got to feel like it makes sense to consumers, that they understand.”

“The key is the business remains healthy … and the business is still growing,” CFO Spencer Neumann told investors.

The company additionally approved a buyback program to repurchase up to $5 billion in common stock, beginning in 2021 with no fixed expiration date. That’s expected to begin the quarter, the company said.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.