Netflix surges on massive subscriber growth

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Netflix shares surged on  Wednesday after the streaming giant easily topped expectations for quarterly earnings and subscriber growth.

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NFLXNETFLIX INC.302.80+7.04+2.38%

The Los Gatos, California-based company said Tuesday revenue jumped 34 percent to $4 billion, matching estimates of Wall Street analysts polled by Refinitiv. Earnings jumped to 89 cents per share, well above a projected 68 cents.

Netflix also posted strong subscriber growth – a key barometer of the company’s performance. The company added 6.96 million overall paid users, topping Wall Street’s expectation of 5.15 million additions, and an internal projection of about five million. Of that total, 1.09 million are based in the U.S., while 5.87 million are based overseas.

“As a reminder, the quarterly guidance we provide is our internal forecast at the time we report and we strive for accuracy in our forecast. This means in some quarters we will be high and other quarters low relative to our guidance. This quarter, we under-forecasted memberships,” Netflix said in a letter to shareholders. “The variance relative to forecast was due to greater-than-expected acquisition globally, with strong growth broadly across all our markets including Asia.”

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The company said it expects to add 9.4 million net subscribers globally in its fourth and final quarter of the fiscal year. Netflix shares have risen more than 70 percent so far this year.

Netflix has spent aggressively to develop original content to lure new subscribers despite tough competition from services offered by Amazon and other outlets. The streaming platform is expected to spend $13 billion on content in 2018 alone.

The company announced earlier this month that it would build a new production facility in New Mexico as it ramps up original content efforts.

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