Netflix’s Q4 Earnings Indicates Slowing Subscriber Growth, Shares Plummet 20 Percent After Report

Streaming platform Netflix saw its shares plunge to more than 20 percent in after-hours trading on Thursday after releasing its earnings report. While Netflix beat the major expectations of analysts, it reported a slowing subscriber growth.

Earnings per share recorded was $1.33 beating the expectation of 82 cents from analysts at Refinitiv. Netflix reported revenue of $7.71 billion while the expectations of analysts were equally $7.71 billion, according to Refinitiv. Global paid net subscriber additions beat StreetAccount’s estimates of 8.19 million. The streaming giant recorded global paid net subscriber additions of 8.23 million.

Although Netflix’s global paid net subscribers surpassed the expectations of analysts, the company fell short of what it recorded in the same period in 2020. It recorded 8.5 million subscribers in the fourth quarter of 2020 and predicted the same for 2021, but unfortunately, it didn’t hit the target.

The company is already looking forward to the new year. It says it expects to add only 2.5 million subscribers in the first quarter of 2022. In the first quarter of 2021, it added 3.98 million subscribers, meaning that its expectation for the first quarter in 2022 is far below what it had in 2021. Analysts expect the company to add 6.98 million subscribers in the first quarter, according to estimates from StreetAccount.

Although in the past the company said that competition from companies like Disney and Apple wouldn’t affect its growth, Netflix blamed increased competition from other companies as one of the reasons for the setbacks it faced in the quarter. “Consumers have always had many choices when it comes to their entertainment time – a competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering. While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched”, Netflix said.

Netflix reported 222 million paid memberships in the fourth quarter and according to co-CEO Reed Hastings in a pre-taped earnings interview, “It’s definitely frustrating for us, the current slower growth”.

Co-CEO Ted Sarandos also added “It’s a dynamic market for sure, it may not be as steady as people think about it in terms of we’re gonna add X number every quarter, every month, every week, but there’s no question that’s the direction the business is going in”.

The company also announced new developments recently. Last week, the company announced a price increase in the US and Canada. The company has also been talking about venturing into gaming.

The company gave its investors an update on its gaming venture. The company has been releasing games based on popular titles hoping that users will gain an insight into popular characters, helping to shape its content. “We’re now really getting to learn from all of those games,” COO Greg Peters said.

Shares of rivals Disney and Roku were also down more than four percent in after-hours trading on Thursday.