Streaming giant beats analyst subscriber projections by 2 million new customers
Netflix surged past Wall Street subscriber projections when it posted its third-quarter earnings on Tuesday, sending its stock back towards $400 per share in the process.
The streaming giant posted $3.99 billion in revenue, matching analyst projections, while its earnings of 89 cents per share trumped analyst expectations of 68 cents per share. Revenue increased 34 percent year over year.
Most importantly for investors, the company added 6.96 million more subscribers during Q3, easily passing Netflix’s forecast of 5 million new customers. As Netflix edges toward a saturation point at home, with nearly 60 million domestic subscribers, it’s increasingly focused on pulling in international customers. That bet paid off during the third quarter, with Netflix adding 5.87 million new customers outside the U.S.
The company pointed to “greater-than-expected acquisition globally, with strong growth broadly across all our markets including Asia,” as a driving force behind its subscriber growth in a note to investors.
And Netflix expects that growth to accelerate as 2018 comes to a close, with the company projecting it’ll add 9.4 million new customers in its Q4 guidance — comfortably eclipsing its quarterly record of 8.3 million new viewers. Analysts had anticipated Netflix would project 7.7 million new subscribers.
After an underwhelming second quarter report, Wall Street was clearly happy with what it saw from Netflix on Tuesday afternoon, with shares jumping 14 percent in after-hours trading to $393 per share. Netflix shares, after factoring in Tuesday’s after-hours burst, have increased 88 percent since the beginning of the year.
As a sign of the times, Netflix touted its shows as “launching pad for a new generation of global stars” by highlighting the “explosive growth” of its stars’ followers on Instagram.
As usual, it was a busy quarter for the Los Gatos, California-based company. Netflix released new seasons of “Orange Is the New Black” and the Jason Bateman-led “Ozark.” It also added international hit “Black Panther” to its service — something analysts anticipated would fuel subscriber growth outside the U.S. Netflix also recently announced it was acquiring a New Mexico production facility as it looks to create more content in-house.
To pack its service with new shows, Netflix is spending big, with $8 billion committed to content in 2018. The company looked to assuage fears about its spending in its shareholder letter. “We recognize we are making huge cash investments in content, and we want to assure our investors that we have the same high confidence in the underlying economics as our cash investments in the past,” Netflix said. The company ended the quarter with $8.3 billion in long-term debt and $3.1 billion in cash.
Investors haven’t minded the spending, though, as long as the company keeps pulling in new subscribers. Netflix now has 137.1 million total subscribers.
The company will share a webcast of its earnings call at 6:00 p.m. ET on its YouTube investor relations page.