Netflix Third-Quarter Earnings Fall Short of Estimates

Earlier in the year, Netflix surpassed expectations as stay-at-home orders were issued and more people tuned into Netflix to escape the pandemic.

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Netflix reported to its shareholders that its third-quarter growth wasn’t all that was hoped it would be. The media subscriber service at first had an uptick when the government issued stay-at-home orders. This made analysts optimistic about the company’s future quarterly growths. But earnings per share and new additions for its global paid subscriber service for its third quarter fell short. However, its revenue exceeded expectations.

In after-hours trading on the news, shares had fallen by six percent.

Netflix’s EPS, or earnings per share, ended up at $1.74, short of the expected $2.14 per share anticipated by analysts. Its revenue was $6.44 billion. Analysts had predicted $6.38 billion. Paid net subscriber additions at its global tier were 2.20 million, over a million short of the expected 3.57 million.

Netflix noted to its shareholders that the slow subscriber growth wasn’t a surprise. Last year’s third quarter added 6.8 million subscribers, but this year the company is dealing with a global pandemic, just as everyone else is.

Netflix blamed the anemic growth on the company’s “record first-half results.”

For the final quarter of 2020, Netflix is forecasting 6 million paid net additions, far below the 8.8 million the company added in the final quarter last year.

“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,” Netflix execs wrote to its shareholders.

The company said it still expects to launch more Netflix originals in the final quarter than it did last year in the same period, even though there have been production delays because of the global shutdown. Netflix has said it had restarted production on its popular “Stranger Things” and other top shows.

On a positive note, Netflix’s free cash flow was in the green for the third quarter in a row. For the first three quarters of 2020, it remained $2.2 billion in the positive. As the company begins producing again, the company said it might run slightly negative in its cash flow. During 2021, Netflix said its free cash flow would likely range from -$1 billion to possibly breaking even.

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