Netflix shares fall 14% after reports of slower growth

NETFLIX shares fell 14% after the company reported slowing growth in subscriber numbers.

The company gained 5.1 million subscribers worldwide during the April to June quarter, more than one million below the number that its management had believed it could add.

It marked the first time in more than a year that Netflix had not exceeded its subscriber growth projections.

As of June 30, Netflix had 130 million subscribers, including 57.4 million in the US.

It has renewed fears that its growth may sputter as the video streaming service tries to fend off fiercer competition.

Previously, the company has enthralled investors with its ability to consistently top expectations.

But Netflix missed its target badly in the April-June period, causing its high-flying stock to plummet by about 14% to 345.63 US dollars (£261.049) in extended trading.

The shares had more than doubled before the sell-off. GBH Insights analyst Daniel Ives called the second-quarter showing “a near-term gut punch” to Netflix.

Netflix predicted it would add five million subscribers in the current quarter, which ends in September, slightly slower than the pace a year ago.

The spring and summer months traditionally mark Netflix’s most sluggish period as more people go on holiday and spend time outside, instead of watching video.

However, the company still reported earnings that beat analyst estimates.

Earnings grew 32% from last year to $384m dollars (£290m). Revenue climbed 6% to $3.9bn (£2.95bn).

Bringing in more subscribers and money is vital for Netflix because it expects to keep spending more on exclusive TV shows and movies to try to stand out from rivals.

The company will spend as much as eight billion dollars (£6 bn) on programming this year.

Netflix has already been battling challenges from Amazon, Google’s YouTube and Hulu in the video streaming market, and it is likely to face even stiffer competition as other formidable rivals try to muscle into the market.

AT&T has just bought Time Warner in a deal which includes HBO.

This is a pay television and video streaming service that AT&T plans to expand.

Apple, the world’s most valuable company, is spending about $1bn (£750m) on original programming for a video service of its own.