Netflix shares plunged in extended trading Wednesday after the streaming giant reported its first-ever decline in U.S. subscribers and significantly lower-than-expected growth overseas.
According to The New York Times, “The second quarter is typically Netflix’s weakest time of year, but its performance this time was unusually poor.”
For the quarter, Netflix reported a profit of $270.7 million, or 60 cents a share, compared with $384.4 million, or 85 cents a share, a year earlier, while revenue climbed 26% to $4.92 billion. Analysts had expected earnings of 56 cents per share on revenue of $4.93 billion.
But the earnings beat was overshadowed by the subscriber numbers as membership in the U.S. shrank by 130,000 to 60.1 million, even though Netflix had predicted growth of 300,000. It was the company’s first drop in domestic streaming customers since it launched its digital service 12 years ago.
Internationally, Netflix added only 2.83 million paid members, well short of the 4.7 million additions it had predicted.
In the extended session, Netflix shares fell 12% to $319.07 and the stock is now set to open Thursday at its lowest price since January, shaving $20 billion from its market cap.
“Netflix’s continued subscription price hikes might finally have reached the end of some customers’ patience in the U.S.,” TechCrunch said.
In January, the company announced it was raising its rates by 13% to 18%, depending on the subscription plan, with the increases hitting existing subscribers in March. The missed forecast for second-quarter subscriber growth “was across all regions, but slightly more so in regions with price increases,” it said in a letter to shareholders.
But Netflix also noted that “Q2’s content slate drove less growth in paid net adds than we anticipated. Additionally, Q1 was so large for us (9.6m net adds), there may have been more pull-forward effect than we realized.”
For the next quarter, Netflix is forecasting 7 million global paid net adds, driven by such shows as “Stranger Things.” “Consumers around the world continue to move from linear television to internet entertainment at a remarkable rate,” it said.