Netflix missed its Q2 subscriber growth expectations. The streamers stock dropped by 14% in after-hours trading shortly after the company announced the news.
The company acquired 5.3 million subscribers in Q2, about one million less than the 6.2 million forecasted. The company reported 670,000 streaming net adds domestically and 4.47 million internationally. With membership now totaling 130 million subscribers (up 25% year over year), the streaming giant said that earnings, margins, and revenue were all up from prior year. The company boasted its recent Emmy nomination count, which collectively broke HBO’s 17-year run for most nominations by a network/streamer.
Netflix reported a 43 percent rise in streaming revenue year over year, which it says was driven by a 26% and 14% increase in average paid memberships and ASP, respectively. For its first time, the company generated more revenue outside the U.S. ($1.92 billion) than it did domestically ($1.89 billion). Additionally, Netflix says its free cash flow in Q2 totaled -$559 million vs. -$608 million in the year-ago quarter. The streamer said its content cash spending will be weighted to the second half of 2018.
Netflix brushed off news of growing competition from companies such as Disney and HBO, the former which is expected to launch streaming service within the next year and the later which now has more funding with AT&T’s recent acquisition of its parent company Time Warner.
“We believe that consumer appetite for great content is broad and that there is room for multiple parties to have attractive offerings,” the company wrote in a letter to shareholders. “We anticipate more competition from the combined AT&T/Warner Media, from the combined Fox/Disney or Fox/Comcast as well as from international players like Germany’s ProSieben and Salto in France.”
The company said its strategy to fight such competition is “to simply keep improving, as we’ve been doing every year in the past.”