Netflix Inc. reported third-quarter U.S. subscriber growth that missed analysts' estimates as the introduction of new chip-based credit cards cut off some customers. Profit also fell short as the company sped up the recognition of some programming costs.
Shares of the online video service, the top-performing stock in the Standard & Poor's 500 index this year, tumbled in extended trading. Netflix signed 880,000 new domestic subscribers in the period, according to a statement posted on its website Wednesday. That missed the 1.25 million average of eight analysts' estimates compiled by Bloomberg. International subscribers grew by 2.74 million, topping the 2.45 million seen by analysts.
Netflix missed on two key metrics, subscriber growth and programming costs, forcing investors to reevaluate the company during a rapid global expansion. Founder and Chief Executive Officer Reed Hastings has been operating Netflix at break even while he races to sign new customers. The accounting change increases programming costs on some of its $10-billion (U.S.) in long– term TV and film commitments.
The introduction of the new credit cards, designed to help prevent fraud, interrupted the payment system used by Los Gatos, California-based Netflix and its customers. That led to more than expected turnover among subscribers, which the company called involuntary churn.
Shares of Netflix fell 12 per cent to $96.88 in extended trading after the announcement. The stock, which split 7-for-1 in July, has more than doubled this year, tops among S&P 500 members.