Netflix’s subscribers are surging as it blows away Wall Street’s expectations

For the second quarter in a row, Netflix has handily beaten
industry watchers — and its own expectations — in adding a
mountain of additional new subscribers.

Netflix today said it added 5.2 million additional new
subscribers this quarter, a number well above the 3.2 million
new subscriber additions that it set itself — and the stock
promptly jumped nearly 9 percent. More than 4 million of those
new subscribers are international viewers, and it still added
more than 1 million domestic subscribers despite its big push
into markets beyond North America.

As usual, the subscriber numbers are the ones Wall Street cares
about. Netflix can do what it can to alter the calculus of its
operations in order to juice out a better earnings report, but
subscriber growth — like user growth for Facebook and anything
along those lines — are what will determine the future fiscal
success of the company. Netflix dominates locally, but
international audiences represent a much more tantalizing
opportunity that it has to grow into.

It seems that its portfolio of original content is resonating
beyond just domestic markets, as well. There’s a little bit of
linguistic gymnastics happening in its report today, but there
is one line to note here: its international segment now
accounts for around half of its total membership base, and the
company expects “positive international contribution profit for
the full year 2017.” That last bit is a bit confusing, but it
does signal that its international business seems to be more
robust than initially anticipated.

“In Q2, we underestimated the popularity of our strong slate of
content which led to higher-than-expected acquisition across
all major territories,” the company said in its earnings

The company in January said its net subscriber additions came
in at 2 million domestically and 5 million internationally,
well above what Wall Street expected at the time. Netflix has
made big bets on content domestically, but it’s also had to
figure out ways to grow that international audience as the
company has started to make a larger push there as it
increasingly saturates domestic eyeballs. Netflix has lately
referred to the success of some of its international
first-party content like its original series 3%.

On the financial front, Netflix said it had earnings of 15
cents per share on revenue of $2.79 billion. Analysts were
expecting earnings of 16 cents per share on $2.76 billion in
revenue. Again, it’s about in line here, but the subscriber
numbers are the most important ones.

These bets on high-quality original content seem to be paying
off. Netflix racked up a large number of Emmy nominations
this year
. The trick, still, is to parlay those
Emmy-quality shows into growth in its subscribers — and make
them attractive to both domestic audiences and international
ones while it starts to fill in the demand gaps abroad. Netflix
expects to spend $6 billion on original content this year, and
as its users demand more and more content, that number may only

Featured Image:
Markus Henkel
/Flickr UNDER A CC BY 2.0

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