Netflix shares plummeted after hours as the company issued a cautious subscriber outlook and said a push into a fourth international market in the fourth quarter will lead to a loss.
The company's second-quarter earnings far surpassed Wall Street's expectations on Tuesday, while revenues came in as expected.
Following the earnings release, Netflix (NFLX) shares fell more than 12 percent. (Click here to get real-time quotes for Netflix.)
In a letter to shareholders, the company said net domestic subscriber additions came in about 50 percent fewer than in the second quarter in 2010.
The company also issued a cautious outlook, expecting domestic suscribers to be "about equal" next quarter to what they were two years ago (with 1.8 million new U.S. subscribers.) Third quarter guidance is for 1 million to 1.8 million domestic net new subscribers.
Moreover, the company expects the Olympics to have a "negative impact on Netflix viewing and sign-ups."
Netflix also said its profitable US streaming and DVD businesses are funding its international expansion. While it expect to remain profitable in the third quarter, Netflix's move into a fourth international market in the fourth quarter, will lead to a consolidated loss.
The company posted second-quarter earnings excluding items of 11 cents per share, down from $1.26 per share in the year-earlier period.
Revenue rose to $889 million from $789 million a year ago.
Analysts had expected the company to report earnings excluding items of 5 cents per share on $889 million in revenue, according to Thomson Reuters.
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