Netflix shares rose more than 10% after the digital streaming giant said it added 5.2 million new subscribers in the second quarter, easily beating analysts’ projections.
The return of marquee content such as “Orange is the New Black” and “House of Cards” helped boost Netflix subscriber growth in a historically weak quarter. Analysts had predicted growth of 3.23 million subscribers.
Netflix also reported earnings late Monday that fell slightly short of analyst estimates, while revenue exceeded expectations. In after-hours trading, its stock rose 10.7% to $178.98, setting a new intra-day high.
The company had close to 104 million subscribers for the period that ended in June, nearly 2% higher than it had forecast. “We underestimated the popularity of our strong slate of content, which led to higher-than-expected acquisition across all major territories,” CEO Reed Hastings said in a letter to shareholders.
For the third quarter, Netflix is forecasting it will add 750,000 subscribers in the U.S. and 3.65 million overseas. The overseas market now accounts for more than half of Netflix’s total membership base and the company has been investing in original content for its European and Latin American markets.
“Overall, we remain bullish given broadening growth execution globally, the likely benefit of the continued original content ramp and favorable scale and competitive dynamics,” UBS analyst Doug Mitchelson said in a client note.
The company posted earnings of 15 cents per share, versus the 16 cents a share expected by analysts polled by FactSet, while revenue for the period was $2.79 billion compared with the $2.76 billion estimated by analysts.
Last quarter, Netflix projected it would have negative free cash flow for “many years” as it invests in original content. On Monday, the company said it expects $2 billion to $2.5 billion of negative free cash flow this year, a steeper shortfall than the $2 billion in negative free cash flow forecast last quarter.
“With our content strategy paying off in strong member, revenue and profit growth, we think it’s wise to continue to invest,” Hastings said.