Netflix warns of slowdown after subscriber surge

Never Have I Ever was watched by 40 million households in the first four weeks of its release

Netflix has seen a surge in sign-ups due to the coronavirus lockdown, but has warned investors that subscriber growth will slow.

The streaming giant added more than 10 million subscribers in the three months to July, bringing the total of new subscribers to 26 million in 2020.

In contrast, Netflix saw 28 million new subscribers for the whole of 2019.

"Growth is slowing as consumers get through the initial shock of coronavirus and social restrictions."

Netflix shares dropped in after-hours trading as investors digested the firm's quarterly update.

The streaming service's revenue increased almost 25% to $6.1bn (£4.9bn), while profits rose to $720m in the quarter, up from $271m a year go.

The subscriber additions were far higher than analysts had expected.

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While, some people might still end up quitting the service, "the pandemic has clearly shown that Netflix is an indispensable part of viewers lives," said Paolo Pescatore, analyst at PP Foresight.

Sophie Lund Yates, equity analyst at Hargreaves Lansdown, said the streaming service will have to continue to spend heavily on new shows and movies to keep its audience.

"While Netflix is still the biggest fish in the tank, if it wants to keep it that way, there is work to be done," she said, adding that it should focus on markets outside the US where there is more growth potential.

Netflix also announced it was promoting chief content officer Ted Sarandos to co-chief executive.

"This change makes formal what was already informal - that Ted and I share the leadership of Netflix," chief executive Reed Hastings told investors.