Netflix Fails to Thrill with Q2 Results Sending Shares Falling

Shares of streaming giant Netflix were crashing on Wednesday after the market close when the company reported quarterly global new paid streaming subscribers that fell below estimates.

Shares were down over 11% as Wall Street digested the results.

Netflix attributed this to a weaker slate of content that contributed to an unexpected decline in the company’s U.S. subscribers.

For the second quarter, Netflix reported revenue of $4.92 billion compared to $4.93 billion that was expected according to Bloomberg compiled consensus data. Total streaming paid net additions at 2.7 million was also well below the 5.06 million expected. Domestic paid subscribers were a loss of 126,000 compared to a gain of 309,240 that was waited for. International paid subscribers was a gain of 2.83 million compared to an expected gain of 4.75 million.

Earnings per share was a beat at 60 cents compared to 56 cents expected.

The company ended the second quarter with 151.56 million global streamers. This is the first time Netflix hit above 150 million.

Netflix had guided in April that it would have about an 8% decline over the comparable quarter in new paying viewers.

“As you can see over the past three years, sometimes we forecast high, sometimes we forecast low,” CEO Reed Hastings said during an investor presentation Wednesday. “This is one where we forecasted high.”

“There was no one thing,” Hastings added. “It’s easy to over-interpret the quarter membership adds, which are a bit noisy.”

The company said in its report that its missed forecast applied to all regions, but “slightly more so in regions with price increase.”

Looking ahead, Netflix has forecast paid memberships to grow by 7 million, comprising 800,000 domestic additions and 6.2 million international additions. This is in comparison to global subscriber additions of 6.1 million in the comparable quarter last year.

“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,” Netflix had written in its shareholder letter. “Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated.”

“We believe, by making these early investments in original programming and getting our consumers and our members much more attuned to the expectation that we’re going to create their next favorite show, not that we’re going to be the place where you can get anything every time,” Ted Sarandos, Netflix chief content officer, stated.

Disclaimer: We have no position in Netflix, Inc. (NASDAQ: NFLX) and have not been compensated for this article.