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Netflix shares dive after disappointing quarterly results

17 July 2018

After five straight quarters of meeting or exceeding analyst expectations for subscriber growth, Netflix finally fell short, disappointing Wall Street.

Netflix is facing growing competition from global tech rivals and traditional providers
Image Netflix is facing growing competition from global tech rivals and traditional providers

The company called its performance in the second quarter "strong but not stellar".

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The news of just 5.2 million total subscriber adds was especially pointed for Wall Street given Netflix's addition of 7.4 million in the first quarter, well ahead of the 6.5 million projected then. The streaming-video company reported Monday that it added 5.2 million new members between April and June, a million fewer customers than it had previously forecast. For Q3, it projects 650,000 net adds in the USA and 4.35 million overseas. Analysts surveyed by Zacks had expected revenue of $4.14 billion. Analysts had projected revenue of $3.94 billion.

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The company did roughly meet analyst expectations on earnings, at $3.91 billion compared to estimates of $3.94 billion. Global subscriber net additions are projected at 4.35 million, again, below the average 5.095 million. All told, Netflix now boasts upwards of 130 million subscribers across the globe.

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Netflix's explosive growth may be starting to plateau. The reason behind this is that Netflix is now has a free cash flow of negative $559 million meaning they once again spent more in the second quarter of 2018 than they made. For the first time, Netflix generated more revenue outside the U.S.: worldwide revenue totaled $1.92 billion and U.S. revenue was $1.89 billion for Q2. The company also said "HBO and Disney are evolving to focus on internet entertainment services", while Amazon and Apple are investing in content as part of larger "ecosystem subscriptions". "Our strategy is to simply keep improving, as we've been doing every year in the past".

Netflix shares dive after disappointing quarterly results