Netflix Subscriber Growth Falls Short in Q1

Streaming giant continues to add subscribers worldwide, but not as much as expected

Last Updated: April 17, 2017 @ 3:38 PM

There are more than 13 reasons why Netflix has been earnings’ season monster, with Wall Street seemingly placing more value on one most of all: subscriber growth. But for the first quarter of 2017, the company failed to add as many new “Stranger Things” fans as expected.

For the three months ending on March 31, Netflix reported revenue of $2.6 billion and earnings of 40 cents a share. That easily topped the slightly less-than $2 billion in revenue and earnings of 6 cents a share the company pulled in during the same time last year, and exceeded analyst estimates of 37 cents a share in earnings. Revenue was right in line with analyst projections.

Netflix hasn’t fallen short of analyst estimates in five years, and that streak continued in Monday’s earnings. Investors pushed the stock up 3 percent in the day’s trading ahead of its earnings release, anticipating another post-release surge — but that was not to be.

During the first quarter, Netflix grew its worldwide paid subscribers by 5 million — about 200,000 shy of its internal projections. Netflix had forecast an increase of 5.2 million subscribers in the quarter, with 3.7 million international. The streaming giant has 94.4 million paid subscribers in total.

Monday’s disappointing subscriber numbers came on the heels of its biggest-ever subscriber gain of 7.1 million last quarter — with most of those new additions being international customers. The disappointing growth numbers helped send Netflix stock down 3 percent after-hours.

In its earnings release, the company reported that international net additions dipped 22 percent year over year, as Netflix got further away from its January 2016 launch into more than 130 countries, and the initial surge of demand that came with it. Netflix is forecasting 8.15 million net adds in the first half of 2017, compared to 8.42 million for the first half of 2016.

The company plans to spend $6 billion on content this year, and Chief Content Officer Ted Sarandos told TheWrap he’d like to splash a good amount of that cash in California.

Netflix held a tape-delayed earnings webcast at 6 p.m. ET, where CEO Reed Hastings announced that the streaming service was set to surpass 100 million subscribers this weekend. Sarandos also addressed Netflix’ investments in stand-up comedy, which have accelerated in recent months, with the service adding specials from headliners including Dave Chappelle, Amy Schumer and Jerry Seinfeld. He indicated that its the stand-ups themselves that viewers want, not locking down their A-list hosts for other ventures.

“You can do series-level and movie-level viewing on some of these standup specials,” Sarandos said on the webcast. “They’re big ticket investments, but they’re also performing like big-ticket content.”

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