Netflix growth misses mark despite strong earnings

Posted April 24, 2017

While Wall Street estimated to add 364,000 in the US and 2 million internationally.

Global additions rose by 3.53 million, down from 5.12 million in the fourth quarter of last year and down from 4.51 million in the year-ago quarter.

In that time, Netflix has gained more than 72 million more subscribers.

Over the past decade, 'what really did it for Netflix was the explosion of phones and tablets that allowed people to watch video everywhere, ' said Wedbush Securities analyst Michael Pachter.

"But Netflix clearly had a vision before those devices became so ubiquitous", the analyst said.

"We expect to cross the 100 million member mark this weekend", Netflix wrote in its letter to shareholders Monday.

Despite the growth, subscription numbers fell short of expectations - the company previously predicted 1.5 million in the USA and 3.7 million internationally. Netflix concluded March with nearly 48 million users outside the U.S.

Netflix is to spend over $1 billion on marketing this year as it looks to boost subscriber numbers.

The video streaming firm reported revenue that was in line with consensus for the first quarter but missed estimates and even its guidance on subscribers.

The Los Gatos, Calif. -based company reported net subscription additions of 4.94 million for the quarter, falling shy of its guidance. Since management has attributed net add outperformance to excitement around original content, Netflix will need to continue ramping up its investment in original content at the expense of acquired content, possibly increasing pressure on margins. Netflix shares took a small dip right after the release but reversed course to 1.5% gains and fresh all-time highs later in the after-hours trading session. This means Netflix now has about 47.89 million worldwide members.

Netflix earnings for the first quarter came to 40 cents per share, which was 3 cents better than analyst expectations.

"We've said previously subsequent seasons of show that are very popular tend to have more impact on the business than introducing brand new IP [intellectual property]", explained Netflix Chief Content Officer Ted Sarandos during the webcast. The company has been on a wild spending spree for years, plowing billions-this year it's $6 billion, to be exact-into original content as it attempts to build a global streaming service, the likes of which have never been seen.