Netflix Updates Q3 and Q4 Guidance

No one escapes the economic downturn! DVD-by-mail rental company Netflix issued an update to its guidance saying that its third-quarter net income and EPS will fall within previous expectations, but it lowered expectations for its fourth quarter.

The company hit two rough patches during August with an outage that interrupted service and cost Netflix $6.5 million in credit given to subscribers. Additionally, “[N]et subscriber growth in July was in line with expectations but August was unusually weak,” CFO Barry McCarthy said in a company press release. Barry went on to say that the business regained some traction in September, but results were still below expectations, which the company blamed on the economic environment.

Netflix says it ended the third quarter with roughly 8.672 million subscribers, just under the previous guidance of 8.675 million on the low end. The company projects third quarter revenue to be within previous expectations of $343 to $348 million.

From the press release, the company revised guidance for the fourth quarter:

  • Ending subscribers of 8.95 million to 9.25 million, down from 9.1 million to 9.7 million
  • Revenue of $353 million to $359 million, down from $357 million to $367 million
  • GAAP net income of $18 million to $23 million, unchanged from prior guidance
  • GAAP EPS of $0.30 to $0.38, increased slightly from $0.29 to $0.37

Netflix’s Q3 call will be on Monday, Oct. 20.