Netflix forecasts weak subscriber additions in second quarter

(Reuters) – Netflix Inc on Tuesday forecast global paid subscriber additions in the second quarter below analysts’ estimates, after reporting better-than-expected subscriber additions in the first quarter.

FILE PHOTO: The Netflix logo is shown in this illustration photograph in Encinitas, California October 14, 2014. REUTERS/Mike Blake/File Photo

The company said it now expects to add 5 million subscribers globally in the current quarter compared with 5.48 million paid subscribers globally, according to Factset estimates.

The second-quarter forecast was also lower than 5.45 million subscribers that the company added a year earlier.

In the reported quarter, Netflix added 7.86 million paid subscribers internationally, compared with the average analyst estimate of 7.14 million, according to IBES data from Refinitiv.

The company said it signed up 1.74 million paid subscribers in the United States in the first quarter ended March 31, above the average analyst estimate of about 1.57 million, according to IBES data from Refinitiv.

The company has been adding subscribers at a faster pace, fueled by higher spending on original shows such as “Sex Education” and “Russian Doll”.

Netflix spent $7.5 billion on content for 2018 and executives have said that number will grow in 2019.

The additions come against the backdrop of intensifying competition in the streaming services space. Last week, Disney priced its highly anticipated streaming video service below Netflix. Netflix shares closed down 1.4 percent, while those of Disney touched an all-time high.

Apple Inc, AT&T Inc’s WarnerMedia and others are also plan new streaming services..

“We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings”, the company said in a statement.

But Netflix’s aggressive spending on content has been accompanied by a tripling of the its debt in two years to $10.36 billion in 2018 from $3.36 billion in 2016.

Net income rose to $344.1 million, or 76 cents per share, in the first quarter, from $290.1 million, or 64 cents per share, a year earlier.

Total revenue rose to $4.52 billion from $3.70 billion. Analysts on average had expected revenue of $4.50 billion.

Analysts on average were expecting 57 cents per share.

Reporting by Vibhuti Sharma in Bengaluru; Editing by Arun Koyyur

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