Netflix Stock Rises 20% on Q3 Member Growth

The video streaming service added nearly 3.6 million subscribers, far exceeding its own forecast and making up for sluggish Q2 growth.
Matthew HellerOctober 17, 2016
Netflix Stock Rises 20% on Q3 Member Growth

Netflix shares soared in after-hours trading Monday as the video streaming service reported adding nearly 3.6 million subscribers in the third quarter.

The growth in subscribers far exceeded Netflix’s forecast of about 2.3 million new subscribers and made up for its sluggish second quarter, when it added 1.7 million members. The third quarter included 3.2 million new international subscribers and 370,000 new U.S. subscribers.

“Some bullish Wall Street analysts had suspected Netflix of being conservative with its forecast, but few, if any, expected growth of more than 3 million total,” USA Today noted.

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Netflix now has 86.7 million subscribers worldwide. It attributed the third-quarter growth to “excitement around Netflix original content” including the “Stranger Things” and “Narcos” shows, despite an ongoing monthly price hike of $2 for long-term members.

The Los Gatos, Calif., company also reported third-quarter earnings of 12 cents a  share, significantly beating estimates of six cents a share from analysts polled by FactSet Research Systems, while revenue climbed to $2.16 billion, up from $1.58 billion from the same period last year.

In after-hours trading, the company’s shares rose nearly 20% to $119.64. After Netflix reported its second-quarter results in mid-July, the stock tumbled 13% the next day to $85.84 a share.

The second-quarter subscriber growth was Netflix’s lowest in two years. So far this year, it has added 12 million new members, equal to the growth in the first nine months of last year, and it is forecasting growth of 5.2 million subscribers in the fourth quarter.

CEO Reed Hasting said Netflix plans to spend about $6 billion next year to increase its original content to more than 1,000 hours in 2017, up from more than 600 this year.

“Over the long run, we believe self-producing is less expensive (including cost of capital) than licensing a series or film, as we work directly with the creative community and eliminate additional overhead and fees,” he explained in a letter to shareholders. “In addition, we own the underlying intellectual property, providing us with global rights and more business and creative control.”