Netflix Misses Wall Street Expectations With 2.2M Subscriber Additions

Reed Hastings and Ted Sarandos

Netflix co-CEOs Reed Hastings and Ted Sarandos

The streamer added 26.7 million subscribers during the first half of the year, but executives cautioned that the uptick in new members wouldn't last.

Summer was slow for streaming giant Netflix, which added 2.2 million subscribers during the third quarter of the year as its earlier coronavirus-fueled growth tapered off.

The company had been predicting that it would see a pullback in new subscribers after a strong first half of the year as people became accustomed to life amid a global pandemic. As a result, it forecast that it would add a relatively modest 2.5 million subscribers during the three-month period from July to September.

Still, Wall Street analysts were expecting the streamer to add around 3.6 million subscribers during the period, per Goldman Sachs. The company's soft quarter — down from 6.8 million net adds in the same period last year — sent the stock down around 5 percent during after-hours trading on Tuesday.

In spite of the lower-than-expected quarterly subscriber growth, Netflix has had a strong year. Its base shot up by 26.7 million subscribers during the first six months of the year as the novel coronavirus forced people to cancel plans and stay home. All told, Netflix has added more subscribers during the first nine months of the year than it did in all of 2019. It is forecasting that it will add 6 million subscribers during the period that ends in December.

"The state of the pandemic and its impact continues to make projections very uncertain, but as the world hopefully recovers in 2021, we would expect that our growth will revert back to levels similar to pre-COVID," the company said in a preview of next year's results. "In turn, we expect paid net adds are likely to be down year over year in the first half of 2021 as compared to the big spike in paid net adds we experienced in the first half of 2020."

Though Netflix's main subscription driver, original programming, took a hit as the company paused productions during the height of the pandemic, the company says it still expects to release more shows in 2021 than in in previous years. It said it has completed principal photography on more than 50 shows since March and expects to complete shooting on more than 150 other productions by the end of the year. Some of Netflix's biggest titles, including Dwayne Johnson action series Red Notice and returning series Stranger Things and The Witcher, have restarted production. Netflix says it expects many of its most popular titles will launch in the second half of 2021.

Revenue for the period was $6.4 billion, in line with analyst estimates, and earnings came in at $1.74 per share.