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Netflix misses subscriber growth targets, but expects a big Q2

An USB key with the logo of Netflix the American provider of on-demand Internet streaming media is seen in Paris Netflix misses subscriber growth targets, but expects a big Q2
Manuel Armenta | 26 Abril, 2017, 11:52

Netflix (NFLX, Tech30) added 5 million members globally in the first quarter of 2017, bringing its total subscriber base to just shy of 99 million users.

In fact, Netflix management apparently said they could pass that milestone as early as this weekend, which is a clue for those who are playing close attention.

Indeed, the company noted that the USA and other established markets have been funding global expansion for several years. While Wall Street estimated to add 364,000 in the USA and 2 million internationally.

Netflix started making its own shows in 2013, with House of Cards one of its first big hits and Stranger Things more recently. Combined, Netflix claims 94.36 million paid subscribers worldwide.

Hastings revealed that Netflix has invested more than ~$1.8 billion in content alone in Europe, and he sees that budget growing as the company pursues growth overseas.

Netflix plans to spend US$1 billion (S$1.4 billion) this year on marketing to attract subscribers.

Netflix said it expects to add 3.2 million new customers in Q2 and to have a total of 8.15 million net adds in the first half of the year - down from 8.42 million in H1 2016.

Despite the growth, subscription numbers fell short of expectations - the company previously predicted 1.5 million in the US and 3.7 million internationally.

In turn the number of net additions have fallen; Netflix now expects to have 8.15 million net adds, compared to 8.42 million net adds in the first half previous year.

"It wasn't a strong quarter for Netflix in terms of content", said eMarketer senior analyst Paul Verna.

He goes on to say, "Considering the new seasons of House of Cards and Orange is the New Black are scheduled for release later this quarter as well, we believe guidance could prove conservative". Hastings also made it clear that unlike Amazon Prime Video, Netflix has no intentions of getting into live streaming of sporting events.

"Additionally, investors ask us about Amazon's move into NFL football".

The company also posted $2.64 billion in revenue - which met estimates and is up 34 percent from last year - and diluted earnings per share of $0.40, which beat estimates and is up from $0.06 last year. Analysts found that Los Gatos earned $178 million on revenue of $2.6 billion in the first three months but Netflix will make $482 million on revenue of more than $11 billion for the entire year.