Although Netflix Inc. surpassed its projected subscriber growth in the first quarter, the streaming giant disappointed in terms of its forecast for international business.
Netflix Shares Plummet by 9% amid Growth Concerns
Netflix is currently experiencing slower expansion in the US, which has seen shares decline down to about 11 percent on Wall Street.
Based in Los Gatos California, Netflix acquired up to 6.74 million subscribers in the first quarter, more than its 6.1 million estimation. The growth in subscriber numbers can be attributed to overseas growth following the launch of 130 new global markets.
As the second quarter takes root, Netflix estimates that it will acquire 2 million subscribers from the international markets, compared with a subscriber base of 2.37 million a year ago.
These figures are way below street estimates and are a reflection of a surprising slowdown in subscriber numbers in spite of the streaming company going global, according to Drexel Hamilton, an analyst at Tony Wible.
Wible added that this trend would certainly cause some concerns among investors.
Slower Domestic Growth
In the US, subscriber growth was higher than Netflix’s estimates. However, the figures were slightly lower than last year. According to Netflix, the US subscriber base is expected to grow by just 500,000 in the second quarter, much lower than the 900,000-user growth experienced last year.
The streaming giant is faced with two major challenges—in the US, it faces strong competition from Hulu and Amazon and other smaller services and must therefore find innovative ways to grow. On the international market, the uneven rollouts have resulted into equally shaky results, requiring Netflix to quickly live up to Wall Street expectations.
For the first quarter, Netflix reported $27.66 million in profits, which equates to 6 cents a share. This is a slight increase from 23.7 million in profit or 5 cents a share the same time last year.
According to observers, Netflix would have to rely on greater price hikes to boost revenue growth in the domestic markets. It is also expected that Netflix will remain buoyant as more consumers abandon pay-tv and opting for streaming platforms including Netflix.