Netflix Inc. posted weaker-than-expected second-quarter revenue and subscriber numbers, sending its stock sharply lower in after-hours trading.
Netflix NFLX, +1.18% shares fell 14% after the Los Gatos, Calif-based company announced it added 5.2 million streaming users in the second quarter, a substantial drop from the 6.2 million estimate it gave in April. The company added 4.47 million international subscribers and 670,000 domestic subscribers, missing its April estimates of 5.9 million and 1.2 million by a wide margin.
The company reported a profit of $384 million, or 85 cents a share, up from $66 million, or 15 cents a share, in the same quarter a year ago, topping the FactSet consensus of 79 cents a share. Revenue rose to $3.907 billion from $2.785 billion the year before, just below the FactSet consensus of $3.938 billion.
In a letter to shareholders, Netflix said the company had a “strong but not stellar” quarter, acknowledging the company had “over-forecasted” both domestic and global net subscriber additions, saying “acquisition growth was lower than we projected.”
The company also blamed the strengthening of the U.S. dollar for its weaker-than-expected international revenue. In April, Netflix predicted a $65 million-plus impact on international revenue year over year, but the impact turned out to be smaller due to the strengthening of the U.S. dollar against many international currencies, the company said. Netflix does not hedge its revenue with derivatives.
“We slowly adjust pricing over time to mitigate forex moves over the longer term, but when currency movements are rapid, they will affect our near term operating margin,” Netflix wrote. “We’ll tend to outperform our near term operating margin targets on dollar weakness and underperform on dollar strength.”
Netflix shares have seen a meteoric rise of 109% so far this year, while the S&P 500 SPX, -0.10% has risen 4.7%.