SAN FRANCISCO – Netflix met earnings expectations in the third quarter, but fell well short of its subscriber target, adding just 1.16 million U.S. streaming subscribers and 700,000 internationally. Detailed subscriber numbers for Canada were not released, but Netflix stated that growth was “steady to slightly accelerating.”
It added that “both retention and engagement are high among our Canadian members.” It reported that Q3 profitability increased in Canada as “revenue grew more quickly than content expense, and we intend to steadily expand our contribution margin over time, even as we continue to add more content.”
In its third quarter Netflix reported sales of $905 million which was in line with expectations. Net income came in at $7.7 million, with earnings at 13 cents a share, ahead of the analysts' estimates of a profit of four cents per share.
But the announced 1.16 million new U.S. subscriptions place the company's earlier goal of reaching 7 million by year’s end in doubt. It now estimates full-year subscriber additions of between 4.7 million and 5.4 million. Netflix shares plunged more than 15% in after-hours trading Tuesday after the company released its earnings report.
“While we are not growing membership as fast as in 2010, we think that over time nearly all U.S. households will be broadband households, nearly all video will be Internet video, and that as our content and member experience continue to improve faster than competitors, our long-term domestic market opportunity remains 2-3x that of linear HBO,” wrote CEO Reed Hastings and CFO David Wells in a letter to shareholders.
Netflix previously cautioned that it would lose money this year as it expands internationally. Last week, the company launched its streaming service in Scandinavia, having introduced it in the United Kingdom and Ireland earlier this year.
