Netflix’s subscriber growth has slowed dramatically during the summer months after a surge in the spring fuelled by pandemic lockdowns that corralled millions of people in their homes.
The summer slump came as more people sought distraction from the pandemic outdoors and major US professional sports resumed play, offering other entertainment alternatives to the world’s most popular video streaming service.
The drop-off disclosed in Netflix’s latest earnings report was more dramatic than management had warned it might be.
After picking up 2.2 million customers in the July-September period, Netflix finished the quarter with 195.2 million worldwide subscribers.
Earlier, the company had forecast an addition of 2.5 million subscribers during the quarter.
Netflix is still ahead for the year – it has added 28 million subscribers through the first nine months of the year, locking in the company’s largest annual increase in its history.
But the momentum seems to be tapering off, based on the trends Netflix is seeing.
The company is projecting a gain of six million subscribers in the October-December period, down from 8.8 million last year.
Analysts were expecting Netflix to project a gain of 6.4 million subscribers for the final quarter of this year.
The influx of new subscribers has helped boost its stock by 59 per cent so far this year.
But shares of Netflix fell 28.53 dollars, or 5.4 per cent, to 496.89 dollars in after-hours trading after the results came out.
Wall Street generally still sees big things ahead for Netflix, which is based in Los Gatos, California, with its video streaming service poised to surpass 200 million subscribers soon.
The company earned 790 million dollars (£610 million), or 1.74 dollars per share, in the third quarter, up 19 per cent from 665 million dollars (£513 million), or 1.47 dollars per share, a year earlier.
Revenue climbed 22.5 per cent to 6.44 billion dollars (£4.97 billion) from 5.24 billion dollars (£4.04 billion).
Analysts were expecting earnings of 2.13 dollars per share and revenue of 6.39 billion dollars (£4.93 billion), according to a poll by FactSet.