Despite Q3 miss, Netflix predicts record subscriber growth for 2020

Netflix Los Angeles Headquarters
Netflix said it's on pace to pass 200 million paid subscribers before the end of 2020. (Netflix)

Netflix saw its paid subscriber growth slow down during the third quarter but the streaming giant has still forecast record subscriber growth for all of 2020.

Netflix added 2.2 million net memberships in the most recent quarter, fewer than the 2.5 million it predicted. The company said the miss was primarily due to substantial growth in the first half of 2020 and the pull-forward effect it described in its April and July letters to shareholders. Through the first nine months of 2020, Netflix added 28.1 million paid memberships, more than 27.8 million it added in all of 2019.

If Netflix meets its subscriber forecast for the fourth quarter, it will put the service past the 200 million subscriber mark. The company ended the third quarter with approximately 195 million paid subscribers.

Netflix said the APAC region contributed 46% of its third-quarter global paid net adds and that revenue in the region rose 66% year over year.

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“We’re pleased with the progress we’re making in this region and, in particular, that we’ve achieved double digit penetration of broadband homes in both South Korea and Japan. While this is encouraging, we still have much work to do and we're working hard to replicate this success in India and other countries,” the company wrote.

For the fourth quarter, Netflix expects to add 6 million new paid memberships which would be fewer than the 8.8 million it added in the fourth quarter of 2019 but still enough to give the company a record 34 million paid net adds for 2020, much higher than its previous annual high of 28.6 million in 2018. However, the company warned that its subscriber growth in the first half of 2021 will likely be much lower than what it experiences this year.

Netflix’s third-quarter revenue totaled approximately $6.4 billion, operating income totaled approximately $1.3 billion and operating margin was about 20% for the second quarter in a row.