Netflix released its first-quarter earnings for 2017 earlier today. Unfortunately, Q1 was a miss for Netflix who came up short on its first-quarter subscriber growth goals that it set for itself at the beginning of the year.
At the beginning of 2017, Netflix projected that it would add 5.2 million subscribers during the first quarter—1.5 million in the US and 3.7 million internationally. If that estimate had been correct, Netflix would have entered Q2 with 99 million subscribers; which would have put Netflix in a great position to pass that elusive 100 million mark.
As it turns out, Netflix’s projections were too ambitious. They missed the mark with only 1.42 million new US subscribers and 3.53 million international subscribers. That’s still impressive, but missing projected earnings never bodes well for a public company–Netflix is no different. At the end of the day, Netflix shares dropped 3% as a result of their Q1 report.
While many are viewing Q1 numbers as a failure, Netflix did not miss its projections by much—a mere 170,000 international subscribers and 80,000 US subscribers short. In fact, Netflix still expects to pass their 100 million subscribers milestone at the end of Q2. If, of course, they meet their Q2 projections.
For the second-quarter of 2017 Netflix projects that they will add 600,000 domestic subscribers and 2.6 million international subscribers. Clearly Netflix expects to see the most growth in the international market as they continue to divert heavy amounts of their budget towards developing new original content.
Netflix ran into growth issues last quarter as well, making this the second consecutive quarter the content behemoth missed their projected numbers. Even though they didn’t hit their Q1 goals this year, Netflix still showed impressive growth reinforcing the notion that Netflix hit a temporary subscriber plateau towards the end of last year as a result of raising their monthly subscription costs.
Those who are closely watching Netflix’s performance should be pleased with the results for 2017 thus far. It is important to remember that Netflix may profess vast growth ahead, but for it to actually make its Q2 projections the US market must perform perfectly, and that is by no means guaranteed.
Sources:
- https://www.bloomberg.com/gadfly/articles/2016-10-17/netflix-s-subscriber-gains-mask-pile-of-burning-cash
- https://techcrunch.com/2017/04/17/netflix-misses-its-growth-targets-but-expects-more-than-100m-subscribers-next-quarter/
- https://www.streetinsider.com/
