Netflix shares were trading in premarket action on Tuesday 12% lower, after the company, which is based in Los Gatos, California, announced it has added 5.2 million new streaming subscribers during its second quarter, which was a significant drop from the estimate of 6.2 million the company had released during April.
Netflix added approximately 4.47 million new international subscribers but just 670,000 in the U.S., missing its estimates from April of 5.8 million and 1.2 million.
Netflix’s profit for the quarter was $384 million equal to 85 cents per share, which topped estimates of 79 cents and up from last year during the same quarter of $66 million and 15 cents per share.
Revenue increased from last year during the same quarter of $2.79 billion to $3.91 billion, and just slightly less than estimates of $3.94 billion.
Netflix said, via a letter to its shareholders that the company’s quarter had been strong but was not stellar, acknowledging that it over-forecasted both domestic and international net additions of subscribers and growth in acquisition was also lower than they had been projected.
CEO Reed Hastings, during a prerecorded call with an analyst that is the company version of an earnings call, said that the company had experienced this shortfall before during the second quarter in 2016, and an explanation was never determined to it other than there being bumpiness, but then continued performing well the following quarter.
The big question investors have said one analyst is whether this was a blip for one quarter or the first signs of possibly something worrisome.
Netflix, in its shareholders letter, blamed the U.S. dollar strengthening for weaker than had been expected revenue globally. In April, Netflix predicted an impact of $65 million on its year over year international revenue, but that impact was much smaller due to the dollar strengthening against other currencies, said company officials.
Netflix also acknowledged in the letter, the rising competitions it has from other companies in entertainment such as Disney and HBO that are evolving and focusing on entertainment services on the internet. Apple and Amazon said the letter, are investing in content to attract more subscriptions.
Netflix also reconfirmed its commitment to a broad range of content to serve a wider variety of tastes.