Netflix plunges as subscriber growth disappoints

Netflix shares plunged in after-hours trading after the streaming giant’s subscriber growth fell far short of Wall Street’s expectations.

The California-based company added 670,000 net subscribers in the U.S., far below the 1.19 million net additions expected by analysts polled by Thomson Reuters. International subscriber growth also fell far short, as Netflix added 4.47 million against an expected 4.97 million.

The company reported quarterly revenue of $3.91 billion and earnings per share of 85 cents. Analysts had projected revenue of $3.94 billion.

Netflix’s stock fell nearly 14% after its earnings report. The subscriber addition shortfall marked the first time in five quarters that the company has missed projections on the key metric.

In a letter to shareholders, Netflix executives said the company had “over-forecasted” its global net subscriber additions for the second quarter.

“We had a strong but not stellar Q2, ending with 130 million memberships. … As a reminder, the quarterly guidance we provide is our actual internal forecast at the time we report and we strive for accuracy, meaning in some quarters we will be high and other quarters low relative to our guidance,” the executives said.

The earnings miss came after a long period of sustained success for Netflix, shares of which are up nearly 80% so far this year. The streaming service earned 112 Emmy nominations for its original content this year, more than any other network, unseating HBO from the top spot for the first time in 18 years.

Netflix’s base of 130 million global paid subscribers is a 25% increase compared to the same time one year ago. The company expects to add about five million subscribers in its third quarter, including 650,000 in the U.S.

Netflix is expected to spend as much as $13 billion on its original content offerings this year in a bid to lure new subscribers, according to Goldman Sachs data cited by the Economist.