Netflix's letter to shareholders was a fairly neutral retelling of its quarterly results, but it was not a blockbuster.
"We had a strong but not stellar Q2, ending with 130 million memberships," the company said in its unsigned shareholder letter. "Membership growth was 5.2m, the same as Q2 last year, but lower than our 6.2m forecast. Earnings, margins, and revenue were all in-line with forecast and way up from prior year."
The Internet video provider missed its own forecast for net subscriber growth for the first time in over a year and investors reacted immediately. After Netflix shares were up $4.68 (1.18%) to $400.48 in normal trading, the stock took a $56.99 (14.23%) dive to $343.49 in after-hours trading.
Netflix CFO David Wells, on the company's video earnings interview, acknowledged the forecasting gaffe but said that the business is still healthy. "We think based on the rolling 12 months of growth we've had... that the background and underlying characteristics of the business haven't changed, the total addressable market is intact and hasn't really changed."
The company is adding more paid subscribers and "the fundamentals have never been stronger," said Netflix CEO Reed Hastings.
For next quarter, Netflix is again forecasting growth. "For Q3, we forecast global net adds of 5.0m (compared with 5.3m in Q3'17), with 0.65m and 4.35m in the US and international segment, respectively. Paid net adds are forecast to be 5.2m, up from 5.0m in Q3'17," the company wrote in its investor letter.
As AT&T and other telcos look to own and control more content and as Disney and other content creators launch competing Internet-based video services, Netflix will need to stay to the course in producing its own shows -- and lots of them. To date, that content investment has paid off in terms of industry recognition as Netflix recently netted 112 Emmy award nominations spread across 40 different scripted and unscripted shows.
— Phil Harvey, US News Editor, Light Reading