Netflix shares fall after slowest growth in four years

James Titcomb
·2-min read
Lily Collins as Emily in episode 1 of 'Emily in Paris' - Netflix
Lily Collins as Emily in episode 1 of 'Emily in Paris' - Netflix

Netflix’s subscriber growth has fallen to its lowest level for four years as the surge the video service enjoyed in the pandemic’s early months fades. 

The video streaming company said it grew subscriber numbers by 2.2m in the third quarter of the year, below estimates and the lowest since early 2016. It follows the record growth enjoyed by the company earlier in the year as sign-ups soared as people were forced to spend more time at home.  

In the first and second quarter, subscriber numbers increased by 15.8m and 10.1m respectively. Netflix attributed the drop to a “pull-forward effect”, meaning that many households that would otherwise have subscribed in the last few months did so earlier in the year, and predicted that growth would pick up again in the coming weeks, forecasting that subscriber numbers would grow by 6m in the current quarter to break 200m.

However, shares fell in after-hours trading following the results, dropping by almost 6pc.

Netflix said it had made tentative progress resuming production, and said it expected to have completed more than 150 productions by the end of the year.  The company has so far been able to sustain a healthy release schedule despite filming being curtailed by coronavirus, although the persistence of the pandemic has raised questions about how long this can be the case.

Free cash flow, a measure of how much money the company is burning through relative to its revenue, hit a record $1.1bn in the quarter, although this was due to slower production spending. It said it expected free cash flow to be negative again next year, although it could be close to breaking even.

Netflix has seen a number of new rivals launch in the last year, including Disney Plus. The company said it continues to view streaming services and apps such as TikTok as rivals for screen time, of which it makes up a minority.