Netflix profit exceeds forecasts
Netflix reported its second-quarter profit sailed past Wall Street projections, as the streaming service’s subscribers vaulted to 65.6 million thanks to hit original programming such as “Orange Is the New Black” and “The Unbreakable Kimmy Schmidt.”
The Los Gatos, Calif., company’s ambitious plans to become a global Internet TV force led to a huge surge in overseas markets, where subscribers reached 23.2 million, up from 13.8 million a year earlier. Domestic subscribers leaped 900,000, to 42.3 million.
Netflix Chief Executive Reed Hastings has in the past said the growth potential for the streaming service could reach 60 million to 90 million subscribers in the U.S. In a call with investors Wednesday, he said he believed the company could keep pace toward that benchmark.
“We’ve been tracking at 5 to 6 million net adds for several years now,” Hastings said. “And our hope is that we can just keep that going — 5 to 6 million every year for a number of years. And then we’ll be solidly in that range, which will feel great.”
Investors poured into the stock in after-hours trading after the second-quarter results were released, sending shares soaring about 10% to nearly $108. The price reflects a 7-for-1 stock split that was declared earlier in the day.
Much of that exuberance was based on subscriber growth in the U.S. and abroad, which often captures more investor attention than financial results.
Netflix reported a second-quarter profit of $26.3 million, or 6 cents a share, down 63% from $71 million, or 16 cents, a year earlier. Most of that drop was fueled by the costs of purchasing and creating content and the value of the dollar on revenue generated outside the U.S.
Revenue, meanwhile, rose to $1.64 billion from $1.34 billion. And the company’s cash on hand fell to $229 million from $163 million in the first quarter because of big investments in original programming with new shows including “Marvel’s Daredevil” and the Jane Fonda-Lily Tomlin comedy “Grace and Frankie.”
Netflix has been on a globe-trotting binge to expand its reach as new members subside in the U.S. It has launched in Australia, New Zealand, France and Cuba, among other territories. It next sets its sights on Japan, Spain and Italy this fall. It expects to complete its 200-country expansion by 2016.