Netflix shares, which as one of the best-performing stocks have soared 109 percent this year, fell almost 14 percent to $344.60 in after-hours trading.
The streaming video pioneer added 5.2 million customers from April through June, 1 million fewer than forecasts from Thomson Reuters I/B/E/S, as it added new programming including "Lost in Space" and new episodes of Marvel's "Jessica Jones" and "13 Reasons Why". In second quarter past year, Netflix posted $2.79 billion in sales.
Netflix predicted it would add five million subscribers in the current quarter, which ends in September, slightly slower than the pace a year ago.
Netflix said it made a profit of $384 million on revenue of $3.9 billion in the recent quarter, compared to net income of $66 million on $2.8 billion in revenue in the same period previous year.
The results broke Netflix's two-year streak of over-delivering on subscriber growth.
The Netflix logo is pictured on a television in this illustration photograph taken in Encinitas, California, U.S., January 18, 2017.
Wall Street analysts expected 1.23 million net adds in the USA and 5.11 million overseas for the period (slightly higher that Netflix's prior guidance). While it's one thing for Netflix to fall short of Wall Street expectations, it's another matter entirely for Netflix to fall short of its own internal projections. That's compared with analyst estimates that Netflix would have Q3 net adds of 947,000 in the USA and 5.05 million internationally. Earnings amounted to 85 cents a share, topping the 79-cent estimate of analysts.
Chief Executive Reed Hastings, in a letter to shareholders, called it a "strong but not stellar Q2". While most of the company's revenue growth comes from worldwide markets, the vast majority of its costs remain dollar-denominated.
J.P. Morgan is expecting Netflix's gross profit to be $6.4 billion in 2018, up from $4 billion previous year.
We were honored last week with the most Emmy nominations of any network.
Going forward, "We anticipate more competition from the combined AT&T/WarnerMedia, from the combined Fox/Disney or Fox/Comcast as well as from global players like Germany's ProSieben and Salto in France", the company said in the investor letter.
"Our strategy is to simply keep improving", Hastings said in the letter to shareholders, "as we've been doing every year in the past".