Netflix Earnings: Stock Tanks on Weak Subscriber Adds

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Netflix shares have plunged after the leading streaming television service said subscriber growth fell short of expectations in the recently ended quarter.

"We had a strong but not stellar Q2", Netflix execs wrote in their quarterly letter to shareholders.

Netflix's stock got hammered after the bell after reporting that it added far fewer subscribers in the second quarter than Wall Street was expecting - and warned of another subscriber shortfall to come in the third quarter.

The California-based company added 670,000 net subscribers in the USA, far below the 1.19 million net additions expected by analysts polled by Thomson Reuters. Analysts were expecting 6.3 million - 1.2 million in the USA and 5.1 million internationally, according to Bloomberg. Over the previous eight quarters, the company has on average topped its total net subscriber addition guidance by about 1 million, with three-quarters of that coming from worldwide markets, according to Wedbush Securities analyst Michael Pachter.

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The company also slightly missed revenue targets, bringing in $3.91 billion compared to Wall Street Expectations of $3.94 billion.

Netflix's explosive growth may be starting to plateau.

Netflix reported Q2 revenue of $3.91 billion, up 40% year over year, and earnings per share of 85 cents (versus 15 cents in the year-ago quarter). All told, Netflix now boasts upwards of 130 million subscribers across the globe. The reason behind this is that Netflix is now has a free cash flow of negative $559 million meaning they once again spent more in the second quarter of 2018 than they made.

Netflix already has been battling challenges from Amazon, Google's YouTube and Hulu in the video streaming market, and it is likely to face even stiffer competition as other formidable rivals try to muscle into the market.

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