Netflix Adds 4.9M New Members In Q1, Sending Shares Up More Than 10%

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Following the bell today, Netflix reported its first quarter financial performance, including revenue of $1.57 billion and adjusted earnings per share of $0.77, with GAAP profit per share of $0.38. The market had expected the company to earn and $0.69 per share on revenue of $1.57 billion.

Following its earnings, the company is sharply up in after-hours trading, after a decline of just under a percent in regular trading. So why’s the market so excited about flat revenues and an earnings miss?

The company reported that its subscriber base grew to a total 62.3 million. That figure includes 2.3 million new domestic subscribers, and 2.6 million non-domestic subscribers. Those figures represented record subscriber growth and were well above company estimates. Netflix’s shares largely trade on its earnings date based on those two figures.

Netflix, like other companies, said weaker revenue and earnings came as a result of headwinds from the increasing strength of the dollar. As the company noted, the dollar’s power cut its international revenue by $48 million, using 2014 exchange rates. That’s a material impact.

Meanwhile, Netflix’s still-a-thing DVD-by-mail business contributed $85 million to its quarterly profit.

The company had negative free cash flow in the period of $163 million due to, in Netflix’s words, its “growing original content investment.” Netflix has $3.0 billion in cash and equivalents, giving it more than enough space to maneuver its short-term investments into new content.

In its letter to investors, Netflix reiterated a commitment to “strong net neutrality across the globe,” likely in an effort to tamp down criticism that the company was walking back its position following new regulations in the United States.

In all, a strong quarter from the company, and one that investors are rewarding with a sharp rally.