Netflix posted another quarter of strong subscriber growth but earnings missed analysts’ expectations as the digital streaming giant continued to spend heavily on content.
Netflix said Monday it finished the third quarter with 109.25 million streaming subscribers worldwide, up 5.3 million on the previous quarter and including 52.77 million subscribers in the U.S. and 56.48 million in international markets.
It was the strongest third-quarter subscriber growth in Netflix history and beat Wall Street’s expectations for an additional 4.5 million subscribers.
“This beat on subscriber targets is an encouraging sign for investors, since Netflix recently started its first price hike since 2015, which some worried might weigh down growth,” Business Insider said.
But the company also reported earnings per share of 29 cents on revenue of $2.99 billion, missing estimates of 32 cents and $2.97 billion. In trading Tuesday, its shares fell 1.8% to $199.00.
“We don’t expect Netflix to become meaningfully profitable on a cash basis for several years, and we don’t expect positive free cash flow for the remainder of this decade,” Wedbush Securities analyst Michael Pachter said in a note to clients.
“We think that Netflix is destined to be a cash-burning high-growth company until it changes its strategy and accepts its fate as a highly profitable slow-growth company,” he added.
Netflix told shareholders it expects to increase spending on content in 2018 to $7 billion to $8 billion, up from the previous guidance of $7 billion. It spent more than $6 billion on content in 2017 and $5 billion in 2016.
According to Business Insider, the price hike — from $9.99 to $10.99 per month for Netflix most popular plan — is “especially important because Netflix may have to continue to raise prices in the future to fund its massive investment in programming.”
“It’s really about slow and steady. We’ve been in no hurry,” CFO David Wells said on an earnings call when asked about the timing for the price hike. “Many investors have sort of criticized us in the past for being under-priced.”