© Reuters
Shares of Netflix (NASDAQ: ) fell more than 4% after hours following mixed results reported by the company. While EPS of $3.29 came in better than the consensus estimate of $2.84, revenue of $8.19 billion missed consensus estimates of $8.27 billion.
Revenue growth of 3% year over year was driven by a 6% increase in average paid membership, while Average Revenue per Membership (ARM) decreased 3% year over year. The decline in ARM is due to limited price increases over the last 12 months (which preceded the launch of paid sharing), the timing of paid net additions (mainly late in the quarter due to the launch of paid sharing on May 23 in Q2) and a higher mix of subscription growth from countries with lower ARMs.
The company added 5.9 million net paid subscribers in the second quarter as a result of the successful rollout of paid sharing in more than 100 countries, which accounts for more than 80% of its total revenue. Purchase expectations were about 4 million more net subscribers.
Management expects revenue growth to accelerate in Q2-2 as the company begins to see the full benefits of paid sharing, as well as continued growth of its ad-supported plan. For the third quarter, the company expects revenue of $8.5 billion, up 7 percent from a year earlier.