Netflix Profit Down, US Subscriber Growth Below Estimates; Shares Fall

(RTTNews) - Online-video streaming service Netflix Inc (NFLX), Wednesday reported a third-quarter profit that halved from last year, hurt largely by higher operating costs even as revenue increased.

Nevertheless, shares of Netflix slipped about 8 percent in extended hours after the company's earnings and revenues missed Wall Street estimates and it reported a disappointing U.S. subscriber growth.

Netflix added 3.62 million streaming subscribers globally in the quarter, above its forecast of 3.55 million, to end the quarter with 69.17 million subscribers. However, the company was only able to add 880,000 customers in the U.S. during the quarter, well below Wall Street estimates, hurt largely by ongoing transition to the new chip-based credit and debit cards. International subscriber additions were 2.74 million.

The video-streaming service provider now focuses on international expansion as it faces strong competition in the US. "With a successful launch in Japan, and our launches next week in Spain, Italy and Portugal, we remain on track to become global by the end of 2016," the company said in the press release.

However, Netflix's international expansion has come with higher expenses, as marketing costs increased to $208.1 million from $145.7 million, while technology and development expenses rose to $171.8 million from $121.0 million last year.

Los Gatos, California-based Netflix's third-quarter profit plunged to $29.4 million or $0.07 per share from $59.3 million or $0.14 per share last year. On average, 36 analysts polled by Thomson Reuters expected earnings of $0.08 per share for the quarter. Analysts estimates typically exclude one-time items.

Netflix's revenues for the quarter rose to $1.74 billion from $1.41 billion last year. Analysts had a consensus revenue estimate of $1.75 billion for the quarter.

NFLX closed Wednesday's trading at $110.23, up $0.50 or 0.46%, on the Nasdaq. The stock, however, dropped $8.62 or 7.82% in the after-hours trading.