Netflix adds seven million subscribers over summer after spring stumble

by Ben Pena October 17, 2018, 18:45
Netflix adds seven million subscribers over summer after spring stumble

Net income came in at 89 cents per share, beating Wall Street's number by 21 cents a share.

The numbers are likely to restore investor confidence in the streaming service, which when reporting second-quarter earnings in July fell short of analysts' forecast for new subscribers by more than 1 million.

Subscriber growth is paramount and in this category, Netflix didn't disappoint. Netflix signed up 6.96 million customers in the quarter, according to a statement on Tuesday (Oct 16), boosting its global total to 137.1 million. The actual total included about one million new subscribers in the U.S. and nearly 5.9 million overseas.

Netflix shares shot up more than 12 percent in after-hours trading on Tuesday following the release of its favorable third-quarter earnings report. During that quarter, Netflix had a dearth of new programming that resonated with viewers the way hits like House of Cards and Stranger Things had done in the past.

The company added 6.96 million new members in the last three months, a record for the quarter and well ahead of analysts expectations, erasing fears that its growth had slowed.

The company also gave a bullish forecast for growth in the fourth quarter, predicting that it would bring in 9.4 million new subscribers.

"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 Inc.

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If the quarter's record-setting slate doesn't move the subscriber needle, Netflix may have to reassess its programming strategy.

As for earnings, Netflix generated $4 billion compared to the $3 billion it took in a year earlier.

Rival Amazon, which launched its Indian studios previous year, plans for 17 original programs, including shows in Hindi, Tamil and Telugu. Analysts were looking for $0.68 a share. Those shows made Netflix "feel more local, more relevant" to local consumers, Chief Content Officer Ted Sarandos said during the call. The shares are up 80 per cent this year.

Wall Street doesn't see Netflix turning cash flow positive within the next four years, according to Bloomberg data. And even United States growth supposedly remains strong, despite fears of a stagnating market.

Media companies that once sold programs to Netflix for hundreds of millions of dollars are now building their own on-demand services to compete head on.

Rivals have long groused that Netflix can spend ungodly sums without ever having to make money itself.

So what do you think of Netflix plans to spend $8 billion on new content?

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