Netflix shares soar on news it added 3.2 million users last quarter

Netflix shares jumped more than 20 per cent in after-hours trading on Monday on the news that the company had acquired more subscribers than expected in its third quarter. The company attributed the 3.2 million new users to interest in new shows such as Stranger Things and Luke Cage, reports The Guardian.

Netflix’s revenue exceeded $2bn for the first time in its history. The boost in subscribers was more than double last quarter’s when a sharp pullback in growth sent the company’s shares into a tailspin. But the growth wasn’t quite at the rate the company grew in the same quarter of 2015.

In the US, Netflix added 370,000 subscribers in the September quarter, more than expected but still sharply down on the year-ago quarter when it added 880,000 domestic subscribers.

Internationally, Netflix added 3.2 million subscribers, easily beating the 2 million forecast. In the same quarter last year Netflix added 2.74 million subscribers, but it has since expanded to 130 countries.

Reed Hastings, chief executive officer, also confirmed that the company might allow rumored downloading to devices in order to view movies offline – in a plane or on an underground train, for example. He would not, however, say when, though other reports have put the start date at the end of 2016. “What we said this year is that we’re open to it, it’s something we’re looking at, but we don’t have anything specific to offer.”

Netflix has had trouble breaking into international markets, in particular China, but it claimed success on Monday, though it wouldn’t say where. The key to its success, said Hastings, is a secret. “For competitive reasons, we’re really not going to break out per-country markets and results,” Hastings said in answer to a question about which countries were over-performing. “We’ve having broad success around international, we’re working to improve the service.”

That success extended to its current English-language programming: “[Stranger Things, Luke Cage and other new shows] performed proportionately well globally,” chief content officer Ted Sarandos said.

There was also veiled discussion of the rumors that Disney might acquire the company. Sarandos added that he didn’t think an acquisition by a major media company would eat into the company’s ability to acquire TV series from that company’s competitors: “This kind of ‘frenemy’ model has existed for decades in television, where competing studios create content for one another,” he said. But Hastings said he believed that Disney’s search for over-the-web distribution would probably result in Disney creating its own app.

Analyst predictions for subscriber growth were in line with the company’s reported figures, but Netflix’s earnings per share were exactly double what the market expected due to a major spike in revenue.

The company’s climbing revenue may be attributable to Netflix’s incremental price rises – the company calls it “un-grandfathering” – on older, cheaper Netflix subscriptions. Netflix has dealt with some subscribers abandoning the service, but not many.

And the company continues to pursue a greater foothold in international markets, especially by investing in shows with local appeal. “We are investing in more content across multiple international markets in Q4 and, as a result, we project international contribution loss to grow moderately to $75m,” wrote spokespeople to the company’s shareholders.

Netflix also licenses material from other networks at tremendous expense; that expense has grown by $1bn in the last three months to $14.4bn.

That has a lot to do with the expansion of our originals and our internationals,” said Wells. “I would expect that to moderate in an 18-to-24-month period.”