Netflix shares fall as it misses expectations for paid-subscriber additions.
Had warned COVID sign-up surge would fade
Netflix Inc. on Tuesday reported fewer paid subscribers in the third quarter as streaming competition increased and live sports returned to television.
The company said it added 2.2 million paid subscribers globally during the quarter ended Sept. 30 compared with analysts’ estimates of 3.4 million, according to IBES data from Refinitiv.
Looking ahead, Netflix forecast it would bring in 6 million new subscribers around the globe, short of the 6.51 million that analysts expected.
Shares of Netflix, one of the biggest gainers this year as people stayed home amid the pandemic, dropped nearly six per cent to US$ 494 in after-hours trading on Tuesday.
Netflix had warned investors that a sudden surge in new sign- ups would fade in the latter half of the year as COVID-19 restrictions eased.
Many viewers — especially in Europe and Asia — have returned to something closer to normal day- to- day life, reducing the amount of time they can spend on Netflix binges. And pro sports has returned to Americans’ TV screens. All of that hampered subscriber gains last quarter, with growth suffering in all three regions.
“It’s the sign of a maturing business,” said Jim Nail, an analyst at Forrester Research. “Infinite growth can’t go on forever.”
It was Netflix’s weakest third- quarter gain since 2015, back when the company wasn’t yet operating in most of the world. In its letter to investors, management blamed a “pull forward” effect: Rapid growth in the first half of the year stole from results in more recent months. The streaming service also warned investors that it would see slower growth in the quarters ahead.
During the quarter, Netflix released Emily in Paris, Enola Holmes and The Devil All the Time.
The streaming video pioneer is trying to win new customers and fend off competition as viewers embrace online entertainment. The pandemic sparked new interest in the service as people a round the world were told to stay home, movie theatres went dark and sports leagues cancelled live games.
In recent months, major sports resumed play and nascent streaming services, including AT&T Inc.’s HBO Max and Comcast Corp.’s Peacock, offered audiences new options.
Netflix said its results reflected the fact that it saw such a big surge in customers early in the pandemic.
“We continue to view quarter- to- quarter fluctuations in paid net adds as not that meaningful in the context of the long run adoption of internet entertainment, which we believe is still early and should provide us with many years of strong future growth as we continue to improve our service,” the company said in a letter to shareholders.
Revenue rose 22.7 per cent to US$ 6.44 billion in the third quarter, edging past estimates of US$ 6.38 billion.
Net income rose to US$ 790 million, or US$ 1.74 per share, in the quarter from US$ 665.2 million, or US$1.47 per share, a year earlier.