Oct 20, 2020 - Technology

Netflix stock sinks after Q3 subscriber miss

Gif of Netflix flexing

Illustration: Rebecca Zisser/Axios

Netflix's stock was down more than 5% in after-hours trading Tuesday after the tech giant reported that it missed expectations on global subscriber growth for the quarter.

Why it matters: Netflix experienced explosive growth during the first half of the year. It wasn't expected to match that growth this quarter, when lockdowns lifted and after new competitive services had launched, but analysts were still expecting it to meet expectations of at least 3.3 million net new global subscribers.

  • Netflix's stock ticked up ahead of earnings on Tuesday in anticipation of good news.

Details: The company met Wall Street estimates for its bottom line, but missed on earnings per share, suggesting that it spent more money on marketing and content relative to its subscriber revenues than investors had hoped.

  • In a letter to shareholders, Netflix said that the pandemic and its impact "continues to make projections very uncertain, but as the world hopefully recovers in 2021, we would expect that our growth will revert back to levels similar to pre-COVID."
  • It also said that it expects paid net subscriber additions to be down year-over-year in the first half of 2021 as compared to the unprecedented spike in subscribers in the first half of 2020.

By the numbers, per CNBC:

  • Earnings per share (EPS): $1.74 vs. $2.14 expected, according to Refinitiv consensus estimate.
  • Revenue: $6.44 billion vs. $6.38 billion expected, according to Refinitiv.
  • Global paid net subscriber additions: 2.2 million vs. 3.57 million expected, according to FactSet.

What's next: The company forecasts it will add 6 million paid net subscribers globally next quarter, bringing its total global paid subscriber count to over 200 million.

  • That's still fewer new subscribers than the number Netflix brought in Q4 last year, but the company is still dealing with the fallout of the pandemic, which has made it harder to produce new content.

Go deeper ... Netflix's earnings over the past year:

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