Netflix beats Street on Q3 results but shares tumble
| 16 October 2014
Netflix has surpassed Wall Street estimates by a hair for its third quarter, but that didn't stop shares from plummeting more than 25% on the back of lacklustre subscriber growth. Profit was good, with the company reporting earnings of 96 cents per share on $1.22 billion in revenue.
Net subscriber additions were lower than expected at 3.02 million, bringing total members globally to 53.1 million. The company is forecasting adding another four million members in Q4, ending 2014 with over 57 million global members.
"Around the world, people are discovering the joy of Internet TV. With an incredible variety of original series, films and exclusive licensed content arriving on Netflix in the coming quarters, we will continue to thrill our members and expand our membership," CEO Reed Hastings said in a letter to shareholders.
Broken down by territory, Netflix added only about a million new members in the US, ending Q3 with 37.22 million members, with lower net additions than forecast and versus the prior year. Domestic streaming revenue of $877 million however grew 25% year-over-year — a result, the company said, of the price changes implemented in Q2, when a $2 increase went into effect.
Internationally, it added two million members, to end the quarter with 15.84 million subscribers — that's also lower than forecast, but higher than the prior year. International revenue came in at $346 million, growing 89% year-over-year.
"For the prior three quarters, we under-forecasted membership growth. This quarter we over-forecasted membership growth," Hastings said. "We'll continue to give you our internal forecast for the current quarter, and it will be high some of the time and low other times."
He added: "Since our per-member viewing and retention in the US are as strong as ever, we don't think increased competition from piracy, TV everywhere, Amazon Prime Instant Video, Hulu, etc, is a major factor."
Wall Street didn't agree with the assessment, and Netflix lost 26% in after-hours trading on Wednesday.