Netflix plunges more than 10% after a huge miss on subscriber growth during Q2

  • Netflix reported earnings for the second quarter on July 17, after the markets closed.
  • The streaming-TV company missed expectations for subscriber growth by a wide margin.
  • It added 2.7 million paid members globally during the quarter, compared to the 5 million that Wall Street expected.
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Netflix added 2.7 million paid subscribers during the second quarter, missing its own guidance and Wall Street expectations for the period by a wide margin.

The stock plunged more than 10% on Wednesday afternoon, after the company reported earnings for the period.

Netflix blamed the miss on a weak slate of originals that drove fewer signups than expected, and price hikes in places like Brazil.

The streaming company lost 126,000 paid subscribers in the US, where its growth has been slowing and new competitors like Disney Plus and HBO Max loom on the horizon.

The company also missed on forecasts in all regions internationally, and said it struggled slightly more in places like Brazil, where it rolled out price hikes during the year. Netflix added 2.8 million subscribers internationally.

Read more:Netflix could be struggling in some key markets, including India and Brazil, but Wall Street is still optimistic

“We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2,” Netflix said, in its quarterly letter to shareholders. “Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated.”

During the second quarter, Netflix released series like “Dead to Me,” which earned actress Christina Applegate an Emmy nod this week, as well as shows like Ava DuVernay’s “When They See Us,” and movies like Adam Sandler’s “Murder Mystery.”

The second quarter is usually slower period for Netflix because it releases fewer original movies and series.

Netflix’s guidance for the third quarter suggests that the second quarter miss could just be a snag. Netflix is forecasting a solid 7 million paid net additions globally for the third quarter, which would be in boost from the 6 million subscribers it added during the period last year.

Wall Street had been looking for Netflix to reassure it that the service could keep growing at a steady clip during the second half of the year, as subscription services from legacy media brands, including Disney Plus, are expected to roll out.

Netflix appears to be off to a strong start to the third quarter, with “Stranger Things” making the biggest four-day debut of any original on the service in July, thecompany previously announced. Popular Netflix originals like “The Crown,” and “Orange Is the New Black,” and movies like Martin Scorcese’s “The Irishman” are also due out later this year.

Here were the key numbers in Netflix’s Q2 earnings:

  • Q2 revenue: $4.92 billion, versus Wall Street estimates of $4.93 billion and Netflix forecast of $4.93 billion.
  • Q2 earnings per share (GAAP): $0.60, versus Wall Street estimates $0.56 and Netflix forecast of $0.55.
  • Q2 total paid subscriber growth (paid net additions/losses): 2.70 million, versus Wall Street estimates of 5.06 million and Netflix forecast of 5 million.
    • -126,000 in the US, Wall Street estimates of 309,240 and Netflix forecast of 300,000.
    • 2.8 million internationally, versus Wall Street estimates of 4.75 million and Netflix forecast of 4.7 million.
  • Q3 total paid subscriber growth est. (paid net additions): 7 million, versus 6.07 million in Q3 2018.
    • 800,000 in the US
    • 6.2 million internationally
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