Netflix Soars Past Expectations on Earnings

On Tuesday, Netflix shares surged by up to 15% after the video streaming service posted earnings that easily beat estimates in its most recent quarterly reports.

Key numbers in the earnings report for the Netflix third quarter compared to expectations included;

  1. Revenue of $4 billion versus an expected $4 billion
  2. Earnings per share of 89 cents versus an expected 68 cents
  3. 96 million additions to subscribers, including 1.09 million domestic subscriber additions versus an expected 673,750
  4. 87 million new international subscribers versus an expected 4.46 million

Netflix growth is accelerating as revenue from streaming was up 36% during the just ended quarter compared to the same period one year ago, though revenue internationally was off by $90 million because of the impact year to year from currency.

Netflix has project that it will add another 9.4 million net subscribers during its 2018 fourth quarter. CEO of Netflix Reed Hastings said the company was getting better at forecasting and by focusing moving forward on net additions can be even more accurate while focusing on fundamentals.

Netflix will rely as well on its film and television studios to make even more of its overall content rather than needing to license content.

Several shows were created at the Netflix studios. It licenses shows as well that might have appeared on television or at theaters before such as Friends or Shameless and obtains the first-window rights to other shows such as 13 Reasons Why and Orange is the Next Black.

Netflix will give guidance only to paid membership subscription ads, starting with the January 2019 earnings report, and will have graphs. It will no longer include free trail end of the quarter subscriber numbers in reports beginning in 2020.

It will also change the way it records some expenses in order to reflect the move by the company towards more content of its own.

Analysts from several Wall Street investment houses cut their target prices for Netflix prior to the Tuesday release of earnings, due to strength of the U.S. dollar, increased interest rates and more expenses for the business.

Nevertheless, shares of Netflix have moved up 80% in 2018, as the consumer continues cutting the cord on traditional cable providers.

It has been projected by online research company, EMarketer, that over 60% of the population of the U.S. will be using service referred to as “over the top” such as Netflix, YouTube, Amazon, HBO Now and Hulu  by the end of 2018, which is up 3% compared to the end of 2017.