Netflix tanks on earnings miss and disappointing subscriber-growth forecast

  • Netflix shares dropped as much as 8.5% in premarket trading on Friday after the group’s second-quarter earnings and third-quarter forecasts disappointed Wall Street.
  • The video-streaming giant added 10 million subscribers in three months, boosting revenue by 25% and earnings per share by 163%.
  • However, its EPS figure fell short of consensus forecasts, and its forecast of 2.5 million subscriber additions this quarter was less than half what analysts expected.
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Netflix stock tumbled as much as 8.5% in premarket trading on Friday as investors shrugged off the video-streaming platform’s robust growth in the second quarter and focused on its disappointing third-quarter forecast.

Surging demand for at-home entertainment during the pandemic meant the company added 10 million subscribers in the period, boosting its total number of paying members to 193 million and driving revenue up 25% to $6.15 billion.

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Netflix also slashed its marketing costs by 28% and spent less on content production as television and movie sets were shut down. The upshot was a 92% increase in operating income and a 163% rise in earnings per share to $1.63.

However, its EPS figure was below analysts’ consensus forecast of $1.81, according to Yahoo Finance.

The group’s shares — up about 60% this year before the earnings release — also dropped because Netflix only expects to add 2.5 million subscribers this quarter, or less than half the number that Wall Street expected.

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Netflix’s co-CEOs, Reed Hastings and Ted Sarandos, anticipate a year-on-year slowdown because the pandemic pulled forward demand and new seasons of “Stranger Things” and “Money Heist” inflated subscriber growth in the third quarter of 2019, they said in a letter to shareholders.

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Disclosure: Mathias Döpfner, CEO of Business Insider’s parent company, Axel Springer, is a Netflix board member.

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