Netflix Inc's subscriber growth and forecast fell short of Wall Street expectations, sending shares of the normally high-flying stock crashing 14 percent on Monday.
The shares plunged as much as 15 percent after Netflix said it added 5.2 million users in the period, about a million fewer than it predicted.
Despite its massive push into content, Netflix has still missed its membership growth forecast of 6.2 million for the second quarter of 2018 (Q2 18), witnessing only a 5.2 million growth to 130 million memberships.
Bringing in more subscribers and money is vital for Netflix because it expects to keep spending more on exclusive TV shows and movies to try to stand out from rivals.
Despite its second-quarter misfire on subscriber growth, the Los Gatos, California, company reported earnings that beat analyst estimates. Analysts at Bloomberg expected the company would add about five million overseas customers during the quarter, but only 4.47 million were added.
Commenting on the reaction of shareholders Eric Schiffer, chief executive of private equity firm Patriarch, said: "Investors are devastated by Netflix's Q2 projection that went down in dramatic flames".
They're also anxious about the amount of cash Netflix might spend this year - up to $4 billion by J.P. Morgan estimates - and the pace of subscriber growth.
Deutsche Bank downgraded Netflix to Hold from Buy, saying that the subscriber number miss was not cause for alarm, but was a reason to reconsider the stock's soaring valuation.
All told, Netflix over the last three months added 670,000 new subscribers in the United States and 4.47 million new subscribers overseas.
Netflix said it had "over-forecasted" quarterly fluctuations in the pace of new customers. Revenue rose 5.6 percent, to $3.91 billion. The company garnered 112 Emmy Awards nominations last week, more than any other television network.
Netflix said it made a profit of US$384 million on revenue of US$3.9 billion in the recent quarter, compared to net income of US$66 million on US$2.8 billion in revenue in the same period previous year.
AT&T just bought Time Warner for $81 billion in a deal that includes HBO - a pay TV and video streaming service that AT&T plans to expand in an attempt to lure more viewers away from Netflix.
Disney is also planning its own streaming service, which is expected to launch in 2019.
At the same time, Netflix faces growing competition.