Netflix posts brill earnings but misses key subscriptions forecasts

Francesca Washtell
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Special Screening Of Netflix's 'House Of Cards' Season 2 - Red Carpet
In the second quarter, the House of Cards creator will add Thai, Romanian and Hebrew to the 24 languages it currently supports (Source: Getty)

Netflix initially got a chilly reception from investors tonight after it added fewer subscribers than analysts had estimated, both in the US and internationally, in the first quarter.

The figures

The video-streaming site added 4.95m subscribers worldwide, just shy of the 5.2m expected. This included 1.42m subscribers in the US, compared with analysts' average forecasts of 1.5m. The miss was partly caused by moving one of its flagship shows, House of Cards, from showing in the first quarter to the second, which also raised operating margins.

It added 3.53m subscribers outside the US in the quarter ended 31 March, though research firm FactSet StreetAccount estimated they would reach 3.68m additions.

Shares in the company fell two per cent in after-hours trading just after the results were announced, before rebounding and rising 1.56 per cent to $149.55 at the time of writing. It had closed up three per cent at $147.25 per share earlier in the day.

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International net additions decreased 22 per cent year-on-year, it said, after lapping its January 2016 of over 130 countries and the "accompanying early surge demand" in the first quarter of last year.

Revenue at the House of Cards creator and Gilmore Girls reviver rose 34.7 per cent to $2.64bn (£2.1bn) in the quarter.

Net income rose to $178m, or 40 cents per share, from $28m, or six cents per share.

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To attract new subscribers, it will spend more than $1bn this year marketing its content.

Why it matters

Netflix has been a pioneering group for non-traditional TV watching, morphing from a video delivery service to an online streaming platform and a high-profile, big-budget content producer.

It says it has maintained "high satisfaction" and is "rapidly growing in Latin America, Europe and North America". A "small but steady" migration to its high-end plan will keep revenue growth "slightly above membership growth" for the time being.

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Upping its prices last year has been a benefit, the group said, and will "moderate over the course of the year to track membership growth more closely".

What Netflix said

"We remain incredibly excited about the opportunity in front of us to build a truly global and durable internet TV business," the company said in its results statement.

We expect to cross the 100m member mark this weekend. It’s a good start.

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