Netflix shares dive on profit miss despite user growth

San Francisco (AFP)

Netflix shares dived on Thursday after the leading streaming entertainment service reported relatively flat quarterly profits despite rising subscriber numbers.

Netflix reported a profit of $720 million on revenue of $6.1 billion in the recently-ended quarter, compared with $709 million profit on $5.8 billion in revenue during the first three months of the year.

Netflix viewership continues to rise throughout the coronavirus pandemic
Netflix viewership continues to rise throughout the coronavirus pandemic Olivier DOULIERY AFP/File

Wall Street analysts had expected stronger profit, especially as people hunkered down at home due to the coronavirus pandemic turn to the service for entertainment.

Ranks of paid memberships grew by 10.1 million, but Netflix warned investors that growth could cool since sheltering-in-place likely accelerated the number of new users joining the service — meaning they rushed to join in the early months, as lockdowns began, instead of spreading out over the year.

Shares quickly dove more than 10 percent in after-market trades that followed release of the earnings figures.

Netflix said in a letter to shareholders that while its slate of original shows for this year is on track, it is focused on safely getting production back up and running.

“As the world slowly re-opens, our main business priority is to restart our productions safely and in a manner consistent with local health and safety standards to ensure that our members can enjoy a diverse range of high quality new content,” executives said in the letter.

“There is no one-size-fits-all approach, and we’re adapting to local circumstances. Today, we’re slowly resuming productions in many parts of the world.”

Netflix is facing increased competition from tech giants such as Apple and Amazon, along with entertainment titans including Disney, NBCUniversal, and WarnerMedia.

“In addition, TikTok’s growth is astounding, showing the fluidity of internet entertainment,” Netflix said in the letter.

“Instead of worrying about all these competitors, we continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers.”

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