Netflix shares dropped as much as 15 percent in after-hours trading after the company posted subscriber numbers that missed its own guidance.
This news overshadowed the movie-streaming company's earnings results that beat analysts' expectations on Monday.
The company said it added 1.7 million subscribers during the quarter, below its own expectations of 2.5 million.
For the quarter, Netflix added 160,000 memberships in the U.S. and 1.52 million internationally. The streaming giant had said in April it expected to add 500,000 members in the U.S. and 2 million internationally.
Despite the disappointment, many analysts remain bullish on the stock and believe these obstacles are short-term headwinds.
Netflix said that membership churn increased slightly during the quarter. The company said that this increase coincided with press coverage of it "un-grandfather[ing] longer tenured members."
"We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering. Churn of members who were actually ungrandfathered is modest and conforms to our expectations," the company said in a statement.
CEO Reed Hastings said that he's confident that this churn is what hit the subscriber numbers.
"Well the obvious explanations other than this are competition, which we're pretty confident that it is not a factor because we got this slight uptick in churn in multiple countries the same week and—of course that's not a competitive signature—including Canada, where many of the other SVOD services don't operate," he said in a conference call with investors on Monday.
CFO David Wells said that this un-grandfathering process is expected to finish in the fourth quarter.
For the third quarter, Netflix said it expects to add 2 million subscribers internationally.
The streaming service posted second-quarter earnings per share of 9 cents on revenues of $2.11 billion. Analysts expected the company to post earnings of 2 cents a share on $2.11 billion in revenue, according to a consensus estimate from Thomson Reuters.