Netflix delivers high earnings in third quarter

Netflix posted earnings which showed it gained over 50 percent more subscribers than expected in the third quarter and shares up at 20 percent.

Photo by: Reuters
Photo by: Reuters

The Netflix logo is shown in this illustration photograph in Encinitas, California October 14, 2014

US on-demand television service Netflix on Monday posted earnings that alleviated concerns over growth, with over 50 percent more subscribers than expected in the third quarter and shares up at 20 percent.

The company said it gained 3.57 million paid subscribers to its streaming service in the quarter - most of them from outside the United States -and finished the quarter with a higher-than-expected 86.74 million subscribers with 39.25 million subscribers of them international.

"Investors appear laser focused on subscriber growth, and so long as Netflix delivers on that metric, investors will bid its shares up," said Wedbush Securities analyst Michael Pachter.

However, Pachter said he thought the continuing cost of developing new shows would undermine plans to deliver material profits in 2017.

The service credited a robust line-up of original programming, including "Stranger Things" and "Narcos," with helping draw fans to the service.

Shares of Netflix rose to $119.82 in extended trade from a close of $99.80.

Netflix has expanded into more than 130 markets worldwide, including most major countries, except China.

It said on Monday it was dropping plans to launch a service in China in the near term, opting instead to licence its shows for "modest" revenue.

The company said it still hopes to launch service in China "eventually."

Reed Hastings, CEO of Netflix, speaks during a press conference in Seoul, South Korea, Thursday, June 30, 2016

In the meantime, Netflix plans to keep pouring money into building its stable of original and licensed TV shows and movies.

Content spending will rise to $6 billion next year, a $1 billion increase from 2016, the company said.

"We will keep investing in growing the content spend, even domestically, for quite a long time," Chief Executive Reed Hastings said on webcast.

Netflix has been facing a slowdown in subscription growth in the United States as the market matures and a planned US price hike raised concerns it would not hit its targets.

It also faces competition from the likes of Hulu and Inc.

But the company, whose other popular original shows include "Orange is the New Black" and "House of Cards", said it expects to add 1.45 million subscribers in the United States in the current quarter.

TRTWorld and agencies