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TechNetflix

Netflix Stock Jumps as Revenue and Subscriber Growth Beat Expectations

By
Tom Huddleston Jr.
Tom Huddleston Jr.
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By
Tom Huddleston Jr.
Tom Huddleston Jr.
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October 16, 2017, 5:49 PM ET
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Netflix shares continued their climb north of $200 on Monday after the streaming service reported third-quarter earnings that beat Wall Street’s expectations in terms of revenue and subscriber growth.

The company’s stock was up roughly 1.5% in after-hours trading after it already closed Monday at an all-time high of $202.68. Netflix posted third-quarter results that included $2.99 billion in revenue, up more than 30% from the same period last year, along with 5.3 million net subscriber additions to bring the company’s total number of streaming members to over 109 million. In July, Netflix predicted it would add 4.4 million subscribers in the three-month period that ended in September.

Monday marked the first time that Netflix stock ever finished the day trading above $200, and those shares have been on the rise since the company said earlier this month that it will raise prices for its members for the first time since 2015. The fact that Netflix beat Wall Street’s expectations for its third-quarter revenue and subscriber growth is a positive sign for investors who may be wary of a potential backlash to the company’s latest price hike, though the effects of those pricier subscriptions will likely not be evident until the end of the current quarter.

Once again, Netflix saw most of its subscriber growth overseas, as has been the case for more than a year, going back to the company’s rollout to more than 130 new countries in January 2016. In the most recent quarter, Netflix added a net total of 4.45 million international members, a 39% increase year-over-year, compared to 850,000 new subscribers in the U.S. The latter figure was lower than the domestic subscriber growth Netflix posted in each of the previous three quarters, though the 850,000 net additions did more than double the 370,000 total Netflix put up for the same quarter in 2016.

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Netflix has now reported several straight quarters of exceptional subscriber growth, the number Wall Street most often seems to use as the metric for judging the company’s success. But, as Netflix also continues to operate with negative cash flow (-$465 million in the third quarter, compared to -$506 million in the same period last year), the company’s high-spending ways will remain under scrutiny.

Netflix pumps a lot of money into its content budget, with the company saying it has a whopping $17 billion committed to spending on streaming content “over the next several years.” Netflix is spending more than $6 billion on its own original TV and film programming this year alone, and content chief Ted Sarandos recently said that number would likely hit $7 billion next year. However, on Monday, Netflix said it could spend as much as $8 billion on original content in 2017.

Netflix has found more than its share of success in churning out original programming—scoring critical and popular hits with Emmy-winning series like Stranger Things and The Crown—but, the streaming giant’s ever-growing outlays for original shows and movies mean that Netflix needs to continue to grow its global subscriber base (particularly overseas, where there remains plenty of market opportunity) in order to keep its investors happy.

To that end, Netflix also forecasted netting another 6.3 million subscribers in the current quarter, which would represent a 10.6% dip from 2016’s fourth quarter.

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