Netflix Inc. (NFLX – Get Report) had a lot to live up to when it reported second-quarter earnings after the close on Monday, and it didn’t deliver.
The streaming video giant only added 5.15 million subscribers worldwide compared to 6.2 million expected, although it beat earnings expectations of $0.79 per share by reporting $0.85 EPS for the quarter. By contrast, in the first quarter, Netflix blew away expectations for both national and international subscriber growth. In addition, for the third quarter, Netflix guided for five million subscriber additions (650,000 in the U.S. and 4.35 million international), below a consensus of around six million. Shares were tumbling more than 13% after-hours on Monday after the results and guidance were released.
CEO Reed Hastings, in a letter to shareholders, called the quarter “strong but not stellar.” He gave little reason for why Netflix’s subscriber additions came in under previous forecasts. For the third quarter, Netflix is being more conservative and forecasting net subscriber additions of 5 million — 650,000 in the U.S. and 4.35 million internationally.
Investors have long valued Netflix based on its ability to continue to grow its subscribe base, even as it has raised prices. Though the company’s other financial metrics were in line with analysts expectations, the subscriber growth weakness was enough to send the stock down by as much as 14 percent during after-hours trading.
Netflix shares have surged more than 100 percent since the beginning of the year, boosting the company’s market cap (around $174 billion on Monday) to above that of entertainment and media giant Disney ($164 billion). The companies are poised to duke it out for streaming audiences next year after Disney launches its planned family-friendly streaming service.
TheStreet’s tech columnist, Eric Jhonsa, is analyzing the company’s earnings after the close and then a “video interview” with Netflix executives that’s scheduled to begin streaming at 6 p.m. Eastern time. Check back at the Street.com for this video interview today at 6 pm.