All being well, Wall Street should open solidly overnight Wednesday after Netflix shares soared in after-hours trading on Tuesday after it signed up 40% more subscribers than forecast in the three months to September and quarterly revenue hit a new high.
The company said it the 7 million new customers topped the 5 million forecast by the company in its weak second-quarter report and the most optimistic of market forecasts.
Investors reacted strongly to Netflix’s results, driving the stock up 16% at one stage in after-hours trading.
The shares ended up 11.53% at $US385.85, still a way from the all-time peak of $US423.21 reached in July just before the poor second-quarter figures were released.
And the company expects to top that 7 million figure this quarter with another 7.6 net additions – that could see Netflix with around 150 million subscribers by the end of the March quarter next year, and certainly by June 30.
Some analysts were worried the third quarter report might fall short of forecasts as the second quarter report did. But no such fears in the report out Wednesday morning, (Sydney time – just after 7am) with the streaming video giant reporting record third-quarter subscriber growth and a surge in revenue and earnings.
Netflix added 1.09 million subscribers in the US and 5.87 million internationally, bringing the total number of subscribers to 137 million.
Streaming revenue surged 36%, reaching nearly $US4 billion in the quarter. Net income rose to $US403 million, up from $US129.6 million, in the same quarter a year ago.
CEO Reed Hastings said in his now traditional shareholders’ letter that the company expects to add 7.6 million paid subscribers in its fourth quarter, though its operating margin would tighten because of the higher mix of films at year’s end.
The company thinks it added a total of 9.4 million subscribers this quarter, but 7.6 million will end up as paid subscriptions.
He also said signaled a major change in how it reports subscriber numbers. He said Netflix would begin reporting only paid memberships — a number that he said Netflix has been able to forecast more accurately — starting in January.
On that basis, the company is looking to sign 7.6 million new members this quarter, or more than 600,000 a week.
