Netflix just released its Q3 financial report and it has given the company’s shares a 7.6% boost in after-hours trading despite missing its global subscriber growth forecast.
The company’s Q3 financial report discloses 4 main points.
- International paid subscribers: 6.3 million net as compared to a forecast of 6.2 million.
- Domestic paid subscribers: 500,000 net additions as compared to a forecast of 800,000.
- Revenue: $5.24 billion net compared with predictions of $5.25 billion.
- Earning per share: $1.47 per share in comparison with analyst estimates of $1.05 per share.
Compared to previous reports, the domestic subscriber growth is pretty weak as compared to last year’s. In the first nine months of 2019, Netflix saw 2.1 million net additions domestically while in 2018, the net additions were 4.1 million.
The company’s investors are blaming the decrease in subscriber additions on Netflix’s price hikes from earlier this year. Depending on the packages the prices went up by 13% to 18%.
In light of this situation, the company said:
Since our US price increase earlier this year, retention has not yet fully returned on a sustained basis to pre-price-change levels, which has led to slower US membership growth. On a member base of more than 60m, very small movements in churn can have a meaningful impact on paid net adds.
As a whole, Netflix is now up to 158 million members and is projecting net additions of 26.7 million in 2019, down from 28.6 million net additions in 2018. About this, Netflix says:
While we had previously expected 2019 paid net adds to be up year over year, our current forecast reflects several factors including less precision in our ability to forecast the impact of our Q4 content slate, which consists of several new big IP launches (as opposed to returning seasons), the minor elevated churn in response to some price changes, and new forthcoming competition.
The company’s investors ensure that the decrease in net additions is not because of the rising competition.