Netflix shares tumbled some 10 percent on Tuesday after the leading streaming service reported cooling growth in paid subscriptions that caught fire during the pandemic.
While revenue jumped 24 percent in the first quarter of this year when compared to the same period in 2020, paid memberships grew less than expected to 208 million, Netflix said in its quarterly earnings release.
"We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays," executives said in the release.
Netflix reported profit was up to a stunning $1.7 billion on revenue of $7.2 billion, as subscribers weathered price increases.
The Silicon Valley based company said it expected subscriber growth to accelerate anew later this year as it releases sequels to hit shows.
Netflix executives had cautioned in past quarters that the pandemic likely fueled a surge in subscriptions, with people who would have eventually signed up jumping on board sooner than they might have.
"We're focusing on the fundamentals of our business, which remain healthy," Netflix said.
"We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup."
A shift from traditional television to streamed services such as Netflix remains a clear trend, according to the company.
However, competition is also ramping up from Disney, Amazon and other titans.
"More and more new streaming services are launching, reinforcing our vision that linear TV will slowly give way to streaming entertainment," Netflix said.
"We’re working as hard as ever to continually improve our service so that we are the best entertainment option available."
But the sharp deceleration suggested slower growth ahead from Netflix, sending shares down 11 percent in after-hours trade.
The cooling is a "sign that the world is coming back to more normal at the expense of Netflix," tweeted Gene Munster of the investment firm Loup Ventures. "We think the long-term growth is flattish."