Netflix Shares Fall on Disappointing Subscriber Growth in Third Quarter

Shares of streaming giant Netflix were falling about 9% in after-hours trading on Thursday after the company reported third quarter financial results that revealed weak subscriber growth.

While the company missed expectations on earnings per share, it did however beat on revenue.

Netflix had said that “growth is slowing as consumers get through the initial shock of Covid and social restrictions.”

For the June quarter, Netflix reported diluted earnings per share of $1.59, below analyst forecasts of $1.81. Revenue however climbed 25% to $6.1 billion. For the quarter the company saw 10.1 million streaming subscribers from April to June.

Netflix also announced that the company’s Chief Content Officer Ted Sarandos will become co-CEO alongside current CEO Reed Hastings. Sarandos will also continue his role leading the content operations.

The company’s earnings presentation stated that “Ted joined Netflix over 20 years ago, and we are thrilled to appoint him to be co-CEO with Reed.

“Ted has been my partner for decades. This change makes formal what was already informal — that Ted and I share the leadership of Netflix,” said Hastings.

Lead Independent directory Jay Hoag said, “Having watched Reed and Ted work together for so long, the board and I are confident this is the right step to evolve Netflix’s management structure so that we can continue to best serve our members and shareholders for years to come.”

Hastings has said he has no plans to leave the compay and said in an interview, “To be totally clear, I’m in for a decade.”

Netflix additionally gave Chief Product Officer Greg Peters the additional role of chief operating officer.

Looking ahead, the company has forecast it would add 2.5 million new paid streaming customers around the world. Analysts on averaged expected a projection of 5.3 million, according to IBES data from Refinitiv.

“Investors are disappointed by the weak future guidance and see the initial boost from the pandemic coming to an end,” Haris Anwar, Investing.com senior analyst, remarked.

The second-quarter gains were expected according to Fitch Ratings director Patrice Cucinello. “Do they have to give back some of these subscribers once people aren’t locked in their homes?” she asked.

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