Netflix tonight posted the weakest new subscriber numbers in four years as streaming competition increased, lockdowns eased and live sports returned to television.
The company added 2.2 million paid Netflix subscribers globally during the quarter to 30 September, missing Wall Street’s target of 3.4 million.
Earnings per share also landed below analyst expectations at $1.74. The consensus forecast was $2.14, according to IBES data from Refinitiv.
Shares of Netflix, one of the biggest lockdown gainers, dropped nearly 6% to $494 in after-hours trading tonight.
“Domestic subscribers were nearly flat, which highlights Netflix’s saturation in the U.S.,” said Ross Benes, analyst with eMarketer. With domestic additions slowing, revenue growth will likely come from price increases, he said.
Netflix reported a blockbuster quarter at the start of lockdown, adding 15.8 million subscribers from January through March.
Netflix had warned investors that a sudden surge in new sign-ups would fade in the latter half of the year as Covid-19 restrictions eased.
It forecast in the fourth quarter it would bring in 6 million new subscribers globally – not the 6.51 million analysts expected.
Net income rose to $790m in the third quarter from $665.2m a year earlier.
Revenue rose 22.7% to $6.44bn in the third quarter, edging past estimates of $6.38bn.
The streaming video pioneer is trying to win new customers and fend off competition as viewers embrace online entertainment. During the third quarter, Netflix released “Emily in Paris,” “Enola Holmes” and “The Devil All the Time.”
Netflix acknowledged that competition was increasing as studios across Hollywood from Walt Disney Co to AT&T Inc’s WarnerMedia have restructured to compete more directly for video subscribers.
“Competition for consumers’ time and engagement remains vibrant,” Netflix said in a letter to shareholders.
In recent months, major sports resumed play and new rivals HBO Max and Peacock in the US, offered audiences new options.
Netflix said its results reflected the fact that it saw such a big surge in customers early in the year.
“We continue to view quarter-to-quarter fluctuations in paid net adds as not that meaningful in the context of the long run adoption of internet entertainment, which we believe is still early and should provide us with many years of strong future growth as we continue to improve our service,” the company said.
Netflix said it expected to complete shooting over 150 productions by the end of the year.
It would release more original programming in each quarter of 2021 compared with 2020.