Netflix adds more subscribers than expected

Carla Harmon
October 17, 2018

Netflix added 1.09 million subscribers in the US, and 5.87 million internationally, bringing the total number of subscribers to 137 million.

Shares in online streaming service Netflix have risen 14% in after-hours trading after it reported its subscribers had increased by seven million. Said eMarketer media analyst Paul Verna.

Jim Nail, analyst at Forrester Research, said the latest figures suggested that the second quarter result had been an "aberration, likely the results of a somewhat low volume of new content". These positive results come as head-to-head competitors like Amazon and Hulu are ramping up their content investments, and as companies including Disney, AT&T, and Walmart are teeing up their own direct-to-consumer subscription services. The slate included new seasons of the drama Ozark and the animated comedy BoJack Horseman, ' as well as the company's first Indian original series, Sacred Games' and Ghoul.

That paid off in terms of new subscribers. Netflix doesn't break out its customers by market, with the exception of the USA, though most analysts agree the UK, Brazil, Canada and Mexico rank among the company's largest. Netflix added 5.15 million subscribers in the second quarter of 2018, missing management's original forecast for 6.2 million. To put that in context, 80 million accounts is more than half of Netflix's total subscribers worldwide.

"If you've got five to 10 years more growth in your current market, you're probably optimizing value to stay in your current market and strengthen", said Reed. "We're just going to focus on that for a very long time". It added 6.96 million new subscribers, exceeding expectations and coming in particular relief after the company disappointed during its previous quarter.

"We want to assure investors that we have the same high confidence in the underlying economics as our cash investments in the past", Netflix said in its letter.

Netflix has been borrowing heavily to fund such rapid growth in TV shows and movies.

Last year, it generated $8 billion in global revenues.

Analysts had cut their price targets for Netflix shares ahead of its earnings report, citing a combination of the strength of the dollar, rising expenses and interest rates. Investors should be very pleased to see that Netflix was able to add so many more new users in the USA, especially amid competition from Amazon AMZN and increased market saturation. By the end of the year, Netflix expects to expand that base to 146.5 million.

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