The latest Netflix numbers failed to impress investors, falling short of its own projections, despite reaching almost 125 million paid memberships worldwide. So far the apparently inexorable rise in subscribers has been tracked by a similar rise in stock price but how long can that continue?

Netflix added only 700,000 paid members in the United States in the second quarter of 2018, with a further 4.45 million elsewhere. The total of 5.5 million net paid additions was lower than its own forecasts of 6.1 million, but higher than the 4.7 million a year previously.

Netflix ended the quarter with 56.66 million paid members in the United States and 68.40 million elsewhere, giving a total of 124.35 million, or 129.50 million including unpaid subscribers.

Netflix Paid Streaming Subscriptions 2012-2018 Q2. Source: informitv Multiscreen Index / company reports.

Subscriber growth in the United States is predictably slowing. Although Netflix has far more subscribers than any single television service provider in the United States, it still has fewer than the 84 million the top 10 services in the informitv Multiscreen Index have between them.

Netflix also generates significantly less revenue. Its revenues from streaming in the United States were $6.15 billion in 2017. Comcast alone received revenues of $22.87 billion from video.

Netflix revenue from international subscribers exceeded that of those in the United States for the first time, at $1.92 billion in the second quarter.

For the next quarter Netflix is forecasting paid memberships will be up 5.2 million, compared to 5.0 million the previous year.

The Netflix stock price fell 14% on the news before partly recovering, although still down on its high of $423 but well ahead of its 52 week low of $164.

The question is whether investors have seen the stock price peak, or whether there is more to come to sustain its staggering $165 billion valuation, or $30 billion debt, depending how you look at it.

Netflix is likely to spend around $3-$4 billion more than it makes in subscriber revenue in 2018. Netflix calls this negative free cash flow. Others might think of it as spending money you have not earned. It will invest over $8 billion on programming in 2018.

Netflix is rolling out a new user interface for television screens, intended to allow users to spend less time browsing and more time watching programming. It includes more prominent video previews and a sidebar menu for different sections that users previously had to scroll to reach.

Netflix acknowledges competition is coming from HBO and Disney, from major media mergers, and from international players like ProSieben in Germany and Salto in France.

Speaking to analysts, Reed Hastings, the chief executive of Netflix said “paid net adds are up compared to year ago and forecast to be up a year-on-year over basis in Q3. And the fundamentals have never been stronger”.

He said that median viewing hours were still growing, noting “we’re still a small fraction of every society’s overall viewing, so I think there’s still room to grow there.”

Even in a world of mega media mergers, Netflix now appears to be too big to buy, but that must remain a possibility, as global corporations with even higher valuations contemplate their own online video strategies.