Netflix is still on its rounded-up-to-pretty-great run as it continues to add more and more subscribers, and once again is outstripping its own estimates for growth.
Today the company said it added 5.3 million new total subscribers, with 850,000 coming in the U.S. and 4.45 million coming from international markets. Netflix is spending very aggressively on original content, and so far it looks to be paying off in terms of net subscriber growth as it looks to turn Emmy awards into contributions for its bottom line.
Here’s the money chart:
You can definitely see a blip in that chart above, though: The U.S. subscription additions is expected to fall below where it landed in the fourth quarter last year. While its international growth is forecast to be steady, the company recently hiked its prices, which might put some pressure on its growth in the U.S. The whole process is generally about figuring out how much the market is willing to value Netflix’s services in addition to its ballooning content costs, but that might have a bit of a harder impact on its growth.
Financially, Netflix turned in a quarter that was slightly above Wall Street’s expectations. We’ll get to the core numbers in a second since we won’t get super bogged down here, but in the end, the company appears to be delivering on its strategy. The big question mark is if it can sustain this momentum and keep those Metacritic scores up with its content spending, which will help it attract new users both in the U.S. and abroad. Netflix today in its report also said it would spend between $7 billion and $8 billion on original content next year.
“Our future largely lies in exclusive original content that drives both excitement around Netflix and enormous viewing satisfaction for our global membership and its wide variety of tastes,” the company said in its earnings release. “Our investment in Netflix originals is over a quarter of our total P&L content budget in 2017 and will continue to grow. With $17 billion in content commitments over the next several years and a growing library of owned content ($2.5 billion net book value at the end of the quarter), we remain quite comfortable with our ability to please our members around the world. We’ll spend $7 billion to 8 billion on content (on a P&L basis) in 2018.”
While Netflix was able to beat those fiscal numbers, at the end of the day it’s those subscriber numbers which are the ones that really count. Each new addition is another chance to generate a subscription fee every month, and Netflix also looked to increase the prices of its subscriptions as it figures out exactly what people are willing to spend. Shares of Netflix were up slightly in extended trading, likely a combination of those questions around U.S. growth gauged against its strong performance this quarter.
Shares of Netflix were up slightly in extended trading — around 2% after the report came out — which is likely a combination of those questions around U.S. growth gauged against its strong performance this quarter. This year, the company’s stock has been on a pretty exceptional run:
Here’s the full slash line for the company’s earnings report:
- Revenue: $2.98 billion, compared to $2.97 billion estimated by Wall Streed
- Earnings (adjusted): 37 cents per share, compared to 32 cents per share estimated by Wall Street
- Net subscription adds: 5.3 million (850,000 million in the U.S. and 4.45 million abroad), compared to previous estimates of 4.4 million net additions (750,000 in the U.S. and 3.65 million abroad)
- Q4 forecast subscription adds: 6.3 million (1.25 million in the U.S. and 5.05 million abroad)
- Q4 Revenue forecast: $3.3 billion