Netflix (NASDAQ:NFLX) shares are set for the largest fall this year following a lower than anticipated projection of Q3 earnings, eliciting a negative response from investors. The streaming giant’s attempts to curb password sharing and implement a new advertising strategy have yet to deliver the anticipated sales growth.

On Wednesday, the revealed data led to a roughly 7% drop in share prices in New York’s pre-market trading on Thursday, following a closing price of $477.59. If this holds, it will represent the most significant intraday drop since the previous December. However, optimism surrounding the company’s initiatives has still propelled Netflix shares to rise by 62% this year.

Even though the company increased its subscriber base by 8%, sales only saw a marginal rise of 2.7% to $8.19 billion, falling just short of analysts’ forecasts. This can be partly attributed to fluctuating exchange rates and price reductions in certain markets.

The last quarter also saw Netflix generating a reduced revenue per customer. The company’s forecast for Q3 sales is $8.52 billion, in contrast to Wall Street’s average prediction of $8.67 billion. LightShed Partners analyst, Rich Greenfield, commented that the results, while good, were insufficient to push the stock higher considering the trends of the past quarter.

Netflix leadership encouraged investors to be patient during a conference call, stating that realizing the monetary benefits of paid sharing would take several quarters. In a shareholder letter, the company acknowledged that while progress has been steady this year, they still need to boost growth.

Despite the lower sales, Netflix had a strong quarter in most other respects. It added 5.89 million new customers during the period, over twice the number projected by Wall Street, finishing the quarter with a total of 238.4 million members.

The company credited the crackdown on password sharing as a significant contributor to its growth. A controversial move, it charged users for continuing to share their passwords in over 100 countries from May, as a part of its growth strategy following a slow 2022.

In the first half of 2022, Netflix lost customers, resulting in a significant drop in the stock and leading to a sell-off in other media stocks. Despite initial warnings of increased cancellations due to the new policy, new signups have started to outpace cancellations, with the company predicting sales growth to pick up in the coming months.

Netflix’s increasing profits contrast with the streaming losses experienced by several of its competitors, including Walt Disney, Warner Bros, and Discovery. Its Q2 earnings of $3.29 per share exceeded analysts’ average estimate of $2.85 per share, as reported by Bloomberg.

The company has also increased its free cash flow forecast for 2023 to $5 billion, up from a previous $3.5 billion, due to a strike by writers and actors that suspended production and reduced spending. However, it anticipates a decrease in free cash flow next year once production resumes. Co-CEO Ted Sarandos refrained from commenting on the strike’s impact on new show production.