Netflix enters uncertain Q3 after subscriber miss last quarter

Netflix remote control image
Netflix is forecasting nearly $4 billion in revenues for the quarter, which would represent a 33.6% increase year over year. (Pixabay/Creative Commons CC0)

Netflix is entering somewhat unfamiliar territory today when it will announce its latest quarterly earnings after missing its subscriber growth estimates last quarter.

In July, the company reported it has added about 5.2 million new subscribers—about 700,000 in the U.S. and about 4.5 million internationally. Those are impressive numbers by most standards, but Netflix called the quarter “strong but not stellar” after falling short of the 6.2 million subscribers it said it would add.

“This Q2, we over-forecasted global net additions which amounted to 5.2m vs. a forecast of 6.2m and flat compared to Q2 a year ago, as acquisition growth was slightly lower than we projected,” Netflix wrote in an earnings release (PDF).


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After the miss, media analyst Michael Nathanson said there was no cause for panic.

“So, despite the first big miss on subscribers in a long time (2Q 2016 comes to mind), we can’t imagine that any views are changed by one anomalistic quarter when the path to global SVOD dominance is still so wide open,” Nathanson wrote in a research note.

Netflix forecast 5 million net subscriber additions for the third quarter, down slightly from the 5.3 million it added during the third quarter of 2017. Again, the vast majority of those new subscribers will come from outside the U.S.

RELATED: Netflix reports 'strong but not stellar' 5.2M new customers in Q2

Research firms Cowen and Imperial Capital predicted Netflix will add just fewer than 5 million subscribers. But both of those firms clarified that Netflix is still on a positive trajectory thanks to its international growth and dominance over competitors in the subscription streaming space.

Bloomberg’s analysis suggests Netflix will bounce back with a beat on subscriber estimates by adding about 5.5 million.

While subscriber growth has the potential to come in above or under estimates from Netflix and Wall Street, it appears the company is banking on revenues being well ahead of where they were last year at this time.

Netflix is forecasting nearly $4 billion in revenues for the quarter, which would represent a 33.6% increase year over year. Operating income is anticipated to hit $420 million, and operating margins are expected to come in at 10.5%.

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