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Netflix's 2Q global paid subscriber additions miss expectations

Emily McCormick and Donovan Russo
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Netflix (NFLX) reported quarterly global new paid streaming subscribers that fell sharply short of estimates, as a weaker slate of content contributed to an unexpected decline in the company’s U.S. subscribers.

Here are some of the key numbers from the report, with expectations based on Bloomberg-compiled consensus data:

  • Revenue: $4.92 billion vs. $4.93 billion expected

  • Earnings per share: 60 cents, vs. 56 cents expected

  • Total streaming paid net additions: 2.7 million, vs. 5.06 million expected

  • Domestic paid subscribers: Loss of 126,000 vs. gain of 309,240 expected

  • International paid subscribers: Gain of 2.83 million, vs. gain of 4.75 million expected

Netflix exited the quarter with 151.56 million global streamers, inching above the 150 million mark for the first time. However, the pace of new additions slowed considerably, braking even more sharply than the company had warned of prior to results. The company unexpectedly lost subscribers in its domestic market in the three months to June, marking the first quarterly drop in U.S. customers since 2011.

Shares of Netflix fell 10.59% to $324.07 each as of 9:31 a.m. ET Thursday.

Netflix global paid net adds by quarter (forecast vs. actuals)
Netflix global paid net adds by quarter (forecast vs. actuals)

In April, the company guided toward a deceleration in quarterly net subscriber additions, saying at the time it expected to add 5 million new paying viewers. Such a result would have represented an about 8% decline over the comparable quarter last year. Instead, Netflix’s global net subscriber additions actually dropped by about 48% compared to the second quarter of last year.

“As you can see over the past three years, sometimes we forecast high, sometimes we forecast low,” CEO Reed Hastings said during an investor presentation Wednesday. “This is one where we forecasted high.”

“There was no one thing,” he added. “It’s easy to over-interpret the quarter membership adds, which are a bit noisy.”

Despite the miss on subscriber additions in the second quarter, Netflix is still aiming to see full-year paid subscription additions come in higher this year versus last year, Hastings added.

Some analysts speculated ahead of earnings that Netflix’s hiked subscription prices at the beginning of the year might pose a drag on new additions. Others, however, maintained that any soft new subscriber numbers or churn would be short-lived. Netflix noted in its report Wednesday that its missed forecast applied to all regions, but “slightly more so in regions with price increase.”

For the third quarter, Netflix expects to grow paid memberships by 7 million, comprising 800,000 domestic additions and 6.2 million international additions. This compares to global subscriber additions of 6.1 million in the comparable quarter last year.

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