Netflix adds the least number of net new paid subscribers in fiscal Q2

Netflix Inc (NASDAQ: NFLX) shares tanked about 5% in after-hours trading on Tuesday as the streaming giant said it added the least number of new subscribers on record in its recent financial quarter. It also warned that subscribers growth would be narrower than Wall Street estimates in the current quarter.

Net new paid subscribers

Netflix added 1.54 million net new paid subscribers in the fiscal second quarter versus the year-ago figure of an immensely higher 10 million new subscribers when the COVID-19 pandemic restricted people to their homes. It, however, still topped the FactSet consensus of 1.15 million net additions.

Guidance for the third quarter

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According to Netflix, its subscribers base declined in North America and overseas, particularly Asia Pacific did most of the heavy lifting in terms of bringing new subscribers in Q2. For the third quarter, Netflix now expects to grow its global subscribers by 3.5 million, compared to the consensus estimate of a much higher 5.5 million.

Executives also confirmed on Tuesday that Netflix is set to launch video games on its platform.

Q2 Financial performance

Netflix reported $1.35 billion of net earnings in Q2 that translates to $2.97 per share – an increase from last year attributed to increased subscription prices. Its revenue jumped 19.4% to $7.34 billion. According to FactSet, experts had forecast $7.32 billion of revenue and $3.18 of EPS.

Netflix plans on spending over $17 billion on content this year – an investment that many expect to be a catalyst for strong growth in the back half of 2021, especially as popular titles, including “You” and “The Witcher” are returning for another season.

Tuna Amobi’s comments on CNBC’s “Closing Bell”

Despite disappointing results, CFRA Research’s Tuna Amobi is positive about Netflix. On CNBC’s “Closing Bell”, he said:

There’s no question that the numbers were a little bit soft, especially on the Q3 guidance. On the other hand, however, the pricing power is still there, both engagement and retention are still above pre-pandemic levels. Looking into the next year, as things start to normalise even more, Netflix will get to capitalise on the huge investments it’s made in the international markets. And video games is another area that should portend some type of opportunity in the long run.