Why Netflix's stock is plunging right now

Netflix just had one of its best quarters in recent memory. It added more than 6.7 million new users. It beat its earnings estimates by a wide margin, pulling in more revenue last quarter than in each of the last four quarters that preceded it. And it said it was moving ahead with new experiments in producing original movies.

But if it wants to impress investors, it'll have do even more than that.

Shareholders are punishing the stock: Netflix shares closed down nearly 3 percent in regular trading Monday, and continued to slide nearly 10 percent in after-hours trading.

The big problem for Netflix here is showing that it can continue to grow, particularly in light of stepped up competitive pressure this week from Amazon, which just announced it was selling a standalone video package that appears tailor-made for a head-to-head battle with Netflix.

Investors were disappointed with the company's projections for the next quarter, which ends in June. Netflix anticipates adding just 2.5 million new subscribers, which is just a fraction of the growth it has reported in the past. Analysts had expected the company to add 4.1 million subscribers over that period in the United States and overseas.

The markets' anxiety over Netflix comes a day after Amazon said it was launching its own standalone video offering that consists of its Prime Video catalog for a monthly fee of $8.99. The retailing giant announced the initiative, despite the fact that Netflix currently dominates the streaming video market by accounting for more than 37 percent of all North American Internet traffic. (Amazon chief executive Jeffrey P. Bezos also owns The Washington Post.)

"Everyone is working hard to build the best content," said Netflix chief executive Reed Hastings on Monday's earnings webcast, "and so we're seeing growth in the overall Internet TV market. Of course, that's displacing linear TV, and that's natural."

Amazon's play could put pressure on Netflix domestically. Netflix's U.S. subscriber base is growing slowly, and is expected to account for only a sliver of its net adds next quarter. But Netflix's true advantage may lie abroad, where 80 percent of its new user growth in the next few months will occur, according to the company. Although Netflix's international business is losing money for the company, its international expansion is expected to pay off as it tries target new audiences with new original content.

"The content just keeps improving and that keeps the word of mouth going," said Hastings.

Profits in Netflix's first quarter grew to $27.7 million -- or 6 cents a share -- up from $23.7 million for the same period a year ago. Most analysts had been expecting 4 cents a share. Revenues for the quarter came in at $1.96 billion, slightly below projections of $1.97 billion.