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Netflix Misses on Subscriber Growth, EPS Estimates

Netflix added 2.2 million subscribers in the third quarter, short of its own guidance of 2.5 million adds.
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Shares of Netflix NFLX dropped after hours Tuesday after the company missed earnings estimates and its own guidance for new subscriptions. 

The company reported third-quarter revenue of $6.44 billion and earnings of $1.74 per share. Analysts were expecting the company to report revenue of $6.38 billion and earnings of $2.13 per share.

Netflix reported adding 2.2 million paid subscribers in the quarter, which missed its own guidance. The company had earlier projected an increase of 2.5 million new new subscribers for the quarter after reporting an increase of 10.1 million subscribers in the June quarter and 15.8 million in the March quarter. 

Netflix shares fell 6% on the earnings and subscribers miss after Tuesday's session down 1% to $525.40.

The company said that slowing subscriber growth in the second half of the year is a result of record first half paid net additions. 

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For the fourth quarter, Netflix expects to report revenue of $6.57 billion on earnings of $1.35 per share. The company also expects to add 6 million paid net subscribers in the period. 

Analysts are expecting the media streaming giant to report revenue of $6.58 billion on earnings of 94 cents per share. 

Netflix notes that if it reaches its fourth-quarter subscriber guidance it will have added a record 34 million net subscribers in 2020. It's previous annual high was 28.6 million in 2018. 

Netflix generated $1.3 billion from operating activities in the third quarter after losing $502 million a year ago. Free cash flow of $1.1 billion also jumped from a loss of $551 million a year ago. 

The company reported $8.4 billion in cash on its balance sheet with another $750 million in an undrawn credit facility.