In Netflix's first quarter results, the company stated that it added a record number of new subscribers, beating its projected growth for the period.
Despite this, shares of Netflix drastically dipped in after-hours trading due to the lower-than-expected forecast for the company's international business and concerns on the slowdown of its expansion in the United States.
Netflix added 6.74 million subscribers in the first quarter, beating its target of 6.10 million as it was aided by the fact that the company launched its service in 130 new overseas markets. This is the first quarter that Netflix reported results from its international expansion, and of the new subscribers, 4.5 million are international accounts.
The streaming service, however, said that it is only expecting an additional 2 million new international subscribers for the second quarter, with 500,000 new United States subscribers. While the lower number compared to the figures for the first quarter could be attributed to a seasonal change, the 2.5 million expected new subscribers is still lower when compared to the second quarter of last year, when Netflix added 3.3 million new subscribers.
This low forecast is what prompted the disappointment among investors, causing the plunge in its stocks. Netflix shares dived almost 11 percent in after-hours trading, showing the lack of confidence that investors have in the company after releasing its forecast for the second quarter.
In addition, Netflix is facing increasing competition for its services within the United States and abroad. For example, Amazon has released Prime Video as a standalone service, spinning it out from its Prime subscription. Subscribers can sign up for Prime Video for only $8.99 per month, which is much lower than the $9.99 per month Netflix will begin charging in May.
However, analysts believe that Netflix will continue its strong presence in the streaming industry, as consumers that are becoming cord-cutters as they drop their pay TV subscriptions for streaming outlets will sign up for multiple services, including Netflix.
Netflix will have to step up its growth rate of subscribers to cover its ever-increasing costs for expansion and programming, with the company previously stating that it will be spending $6 billion in content next year after its expected $5 billion expenditure this year.
