Netflix plunges due to slow subscriber growth

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Wall Street darling Netflix's share price plummeted by 14 per cent in after-hours trading, thanks to a set of lacklustre results for its second quarter.

The company gained 5.1 million subscribers worldwide during the quarter, more than 1 million below the number that management had believed it could.

GBH Insights analyst Daniel Ives called the second-quarter showing "a near-term gut punch" to Netflix.

All told, Netflix over the last three months added 670,000 new subscribers in the United States and 4.47 million new subscribers overseas. The company reported earnings of $384 million, or 85 cents a share, up from $66 million, or 15 cents, a year earlier. It marked the first time in a more than a year that Netflix hadn't exceeded its subscriber growth projections. All told, Netflix now boasts upwards of 130 million subscribers across the globe. Sixteen analysts surveyed by Zacks expected $3.94 billion.

Bringing in more subscribers and money is vital for Netflix because it expects to keep spending more on exclusive TV shows and movies to try to stand out from rivals.

Netflix posted its earnings report for the June quarter today and revealed that it added 5.15 million subscribers for the quarter.

Netflix said in a letter to shareholders that it had overestimated the rate of new shows being added to the platform over the quarter, but remained confident that this would not affect its long-term growth.

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"We had a strong but not stellar Q2", Netflix said in a quarterly letter to shareholders.

J.P. Morgan is expecting Netflix's gross profit to be $6.4 billion in 2018, up from $4 billion past year.

But it also faces growing competition.

The Silicon Valley based company noted that it is beginning to "lead artistically" in some categories with its original content, earning enough Emmy nominations this year to break a 17-year top-spot streak by HBO. Apple Inc., meanwhile, is spending more than $1 billion on original programming.

Netflix cited an array of competitors, starting with YouTube.

AT&T has just bought Time Warner in a deal that includes HBO - a pay TV and video streaming service that AT&T plans to expand in an attempt to lure more viewers away from Netflix.

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