Netflix shares down 26% as subscribers disappoint

Netflix reported earnings that were in line with Wall Street estimates, but shares plunged more than 25 percent as subscriber growth figures came in lower than expected.

The company handed in third-quarter earnings of 96 cents per share on revenue of $1.41 billion. Net additions were lower than expected at 3.02 million, bringing total members to 53.06 million. The company attributed the slowdown, in part, to higher subscription costs.

The stock dropped 26 percent in after-hours trading.

Jonathan Nackstrand | AFP | Getty Images

Analysts had expected Netflix to report earnings of 93 cents a share on $1.41 billion in revenue, according to a consensus estimate from Thomson Reuters.

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The company says it expects to add another 4 million members in the fourth quarter, which would bring the total to around 57 million for the year.

The company's closely watched total streaming contribution margin rose to 18 percent from 10.4 percent a year ago. Netflix also reported that it burned cash in the third quarter, to the tune of $74 million.

Netflix recently announced a slew of new content partnerships, including an exclusive deal with comedian Adam Sandler to produce and star in four new feature films, as it looks to compete with traditional media.

The online content provider operates in about 50 countries.

Netflix EPS beat
Netflix EPS beat

Netflix, which brands itself as "the world's leading Internet provider," has caused Hollywood movie-makers to rethink their traditional release models.

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Last month, Netflix said it will premiere the "Crouching Tiger, Hidden Dragon" sequel in August on the same day it's released in select Imax theaters and bypass the usual seven to 18 months it typically waits to gain streaming rights.

Netflix has spurred cable industry heavyweights to evolve as well. On Wednesday, Time Warner's HBO announced plans to launch a stand-alone online streaming service in 2015 to make popular shows like "Game of Thrones" available without a cable subscription.

HBO's announcement comes as more Americans move toward cord cutting or canceling pay-TV subscriptions.

Nearly 45 percent of Americans stream television shows at least once a month—a figure that is expected to jump to 53 percent by 2018, according to eMarketer research.