While it's one thing for Netflix to fall short of Wall Street expectations, it's another matter entirely for Netflix to fall short of its own internal projections. Netflix, based in Los Gatos, California, didn't specify why it fell short last quarter, beyond citing the difficulty of forecasting growth in 190 countries around the world. The numbers also failed to meet Netflix's own forecast, as it also predicted an addition of 6.2 million subscribers for this quarter. Far from it, revenue for the quarter checked in at $3.1 billion, a modest 10% increase from the same quarter a year-ago.
With all this, the stock is tanking.
Netflix added 5.1 million streaming users in the latest quarter, below the 6.2 million forecast the company gave in April.
Along the way, Wall Street may have focused more on the allure of the Netflix story, rather than the company's fundamentals, said Rob Arnott, head of fund advisory firm Research Affiliates.
"This isn't entirely surprising given rising competition in the video streaming market, where Amazon, Hulu, HBO and others are gaining share of subscription video dollars at Netflix's expense", he added.
Foxtel executives are this morning witnessing light at the end of a tunnel with news that consumer engagement with arch rival Netflix is slowing. It marked the first time in a more than a year that Netflix hadn't exceeded its subscriber growth projections.
Netflix shares have taken a tumble in afterhours trading in the wake of the publication of its second quarter earnings.
But Netflix did raise concerns about other players entering the field.
In an earnings release, Netflix admitted to having a "strong but not stellar Q2". Analysts had expected revenue of $3.94 billion.
"Our viewing is setting year-over-year records, the shows that we have coming", he said in a conference call on Monday. For the first time, Netflix generated more revenue outside the U.S.: worldwide revenue totaled $1.92 billion and U.S. revenue was $1.89 billion for Q2.
Netflix said Monday that it expects more competition, but dismissed any potential negative impact on its business. The company will spend as much as $8 billion on programming this year. The world's biggest tech company, Apple, also plans to launch a streaming service that would compete with Netflix. "Our strategy is to simply keep improving, as we've been doing every year", the company said.