Netflix Q2 2018: fewer subscribers than expected, breaking two-year streak

Netflix app on Android

Netflix has released its second-quarter earnings report for 2018, revealing subscriber growth that was lower than what Wall Street analysts had expected.

The streaming service giant revealed that it reached 130 million worldwide subscribers during Q2, a 25 percent year-over-year increase, but one million subscribers under Thomson Reuters’ forecast. Internationally, Netflix brought in 4.47 million new subscribers during this quarter, compared to 4.97 predicted by analysts.

This breaks a two-year streak Netflix had in subscriber growth exceeding projections. Netflix’s shares subsequently plummeted by 14 percent.

Altogether, Netflix reported $3.91 billion USD in overall worldwide revenue, up 40 percent year-over-year but beneath Wall Street expectations of $3.94 billion. For the first time, Netflix generated more revenue in internationally than in the United States. The company posted $1.92 billion in international revenue, while $1.89 billion came from the U.S.

“We had a strong but not stellar Q2,” Netflix wrote in a quarterly letter to shareholders. “This Q2, we over-forecasted global net additions […] as acquisition growth was slightly lower than we projected.”

During the second quarter, Netflix premiered Lost in Space and the second seasons of its Jessica Jones and 13 Reasons Why series, among other programs. For 2018 as a whole, Netflix is expected to spend $8 billion on original content and an additional $2 billion on marketing.

In Canada, specifically, Netflix reportedly spends more on scripted programming than Bell Media. Recently discovered documents stated that the streaming service invested at least $127 million CAD on scripted Canadian content.

Going forward, Netflix acknowledges that it will face increased competition from the likes of Amazon, Apple and even YouTube, which are all continuing to invest in original content. To remain competitive, Netflix said its strategy will be “to simply keep improving, as we’ve been doing every year in the past.”