The US-based streaming video provider announced on Monday it added significantly lower subscribers between April and June than what it, and Wall Street analysts, had expected.
Netflix, which has a strong foothold in Australia and New Zealand, suffered a 15 percent drop in shares in the US after the disappointing second-quarter numbers were released.
Netflix founder and chief executive Reed Hastings pointed to press coverage of the company's $2 price rise in the US to explain the company's failure to meet its forecast of gaining 2.5 million new members in the period.
Netflix grew by 1.7 million members in the second quarter, well below the 3.3 million additions in the same period last year.
"People don't like price increases," Hastings told a conference call. "We know that."
"It is a necessary phase for us to get through.
"With the increased revenue we continue to invest in better content so that's what makes us feel strong and positive about the long term and this is a short term phenomenon."
For the half-year to June 30, Netflix posted revenues of $4 billion, operating income of $120 million, and net income of $68 million. The second quarter accounted for $2.1 billion in revenue, and $70 million in operating income.
While in the US market, the company is able to bank a 35 percent margin on its 46 million paying customers, internationally, its 34 million customers do not contribute to profit, with a -12 percent margin for the first half of the year.
"International revenue rose 67 percent year over year," the company said in its letter to shareholders. "International contribution loss in Q3 is expected to be $95 million as improving profitability in our earlier foreign markets funds the investment in newer international territories."
"We remain confident in these investments because of our success in all of the markets launched prior to 2014 which are individually profitable on a contribution profit basis. These 2010-2013 launch markets are on track to deliver aggregate contribution profit of around $500 million in 2016."
For the third quarter, the company is forecasting it will add 2.3 million customers, of which 2 million are outside the United States, and have operating income of $64 million.
At the time of writing, Netflix shares had dropped to $85.58 in after hours trading from a closing price of $98.39.