Netflix adds more subscribers than thought

NFLX EPS Estimates for Current Quarter data by YCharts

NFLX EPS Estimates for Current Quarter data by YCharts

Analysts had cut their price targets for Netflix shares ahead of its earnings report, citing a combination of the strength of the dollar, rising expenses and interest rates.

The additions helped lift profit more than threefold to 89 cents a share, beating the 68-cent average of analysts' estimates. Netflix added 1.09 million subscribers in the USA, and 5.87 million internationally, bringing the total number of subscribers to 137 million.

Netflix's net income rose to $402.8 million, or 89 cents per share, in the third quarter ended September 30, up from $129.6 million, or 29 cents per share, a year earlier. Analysts predicted growth of 5.07 million users but Netflix managed to attract 6.96 million net additions.

But even at the time, analysts noted that the company tended to follow a pattern of second-quarter dips followed by third-quarter surges; indeed, in the third quarter in 2016, subscriber numbers rose after a second-quarter disappointment.

The growth was stronger than expected, prompting the firm's shares to jump more than 10% in after-hours trade.

The company said it expects to add 9.4 million net subscribers globally in its fourth and final quarter of the fiscal year.

"It was a surprisingly good quarter that caught a lot of the financial community off guard", said Jim Nail, a senior analyst at Forrester Research. He also said the company would begin reporting only paid memberships - a number that he said Netflix has been able to forecast more accurately - starting in January.

Executives said audiences welcomed shows tailored to specific markets, such as "Sacred Games" in India, which the company identified as key to its expansion. The shares are up 80 per cent this year. "Even the US number was better than I thought it would be". Sales jumped 34% to $4 billion and global streaming revenues jumped 49% to $1.97 billion with revenues in the United States increased 25% to $1.94 billion.

The actual total - which included about one million new subscribers in the USA and nearly 5.9 million overseas - set a record for the third quarter, Netflix said.

As for earnings, Netflix generated $4 billion compared to the $3 billion it took in a year earlier. As the company expands its capabilities internally, it found it needed more production capacity - leading to the acquisition of a studio in Albuquerque, New Mexico.

To All the Boys I've Loved Before was a particular standout, as one of the streaming giant's "most viewed original films ever".

Netflix has upended the economics of pay TV by offering customers thousands of programmes on-demand for a monthly fee that's a fraction of the cost of a multichannel cable or satellite package.

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