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Netflix Shares Tumble By 14% After Expected Subscriber Growth And Revenue Sharply Decline

Ranju Warrier
Netflix Shares Tumble By 14% After Expected Subscriber Growth And Revenue Sharply Decline
Online streaming platform Netflix, best known for shows like Narcos, Stranger Things, The Heist, House of Cards and The Crown, recorded a sharp drop in its share after it fell behind its own forecasts by more than a million subscribers.

On Monday after-hours Netflix’s shares fell about 14% in the long-session after the California-based company announced it added 5.2 million new users in the Q2 2018. These figures are significantly lesser than the 6.2 million target which the company had announced in April.

In fact this is first time in last five quarters that the company missed its subscriber addition projections.

The company’s international subscriber additions were recorded at 4.47 million, comparatively lower than the estimated 5.9 million. The number of domestic subscribers totalled 670,000 instead of the estimated 1.2 million.

The company’s revenues rose to $3.91 billion in the second quarter of this year, up from $2.79 billion in Q2 2017. However, it missed the estimated revenue of $3.94 billion.

Shares of Netflix shot-up nearly 150% over the last year thanks to the growth in subscribers and due to an increased preference for streaming and internet-based TV in the entertainment industry. Moreover, the company added 7.41 million new subscribers in the first-quarter last year—a 50% jump from the year-ago, topping its forecast of 6.35 million subscribers.

In its letter to shareholders the company said: “We had a strong but not stellar Q2”. But Netflix pointed out that the earnings were largely as expected. “Earnings, margins, and revenue were all in-line with forecast and way up from prior year.”

“In addition to succeeding commercially, we are starting to lead artistically in some categories, with our creators earning enough Emmy nominations this year to collectively break HBO’s amazing 17-year run.”

Netflix is looking at investing nearly $12 billion on content in 2018 as it looks to tap foreign markets with original content. The streaming giant’s move comes after smartphone maker Apple revealed that it is investing $4.2 billion original content in music, video and publishing by 2022, up from $1 billion this year. Jeff Bezos founded Amazon too is expected to step up its investment on original content from $4.5 billion to $8.3 billion.
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