Published: Wed, October 17, 2018
Markets | By Noel Gibbs

Netflix spikes after earnings and subscribers blow past estimates (NFLX)

Netflix spikes after earnings and subscribers blow past estimates (NFLX)

To All the Boys I've Loved Before is one of Netflix's most-watched movies ever, the company said Tuesday.

Netflix doesn't hide its formula for success. That marked the first time it has exceeded 500 hours in any quarter.

Over the quarter Netflix launched new seasons of Orange is the New Black, Ozark, Marvel's Luke Cage and Bojack Horseman.

Subscriber growth is key to keeping up with the investments.

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"Netflix is approaching a point where the growth in operating profit is going to grow faster than our growth in content cash spend, and that's really going to drive the free cash flow towards improvement - It will eventually breakeven", said Netflix chief financial officer David Wells on a conference call with analysts. Netflix acknowledged that India is "somewhat of a tough market". It is the world's second-most-populous country, and hundreds of millions of residents now have access to the internet.

The performance stands in stark contrast to Netflix' earnings report three months ago, when the company's stock fell as much as 14% after subscriber growth fell short of analyst estimates.

The streaming giant also announced fourth-quarter subscriber growth that blew past expectations.

The service added seven million subscribers worldwide from July through September, far above the target of five million set by Netflix's management and exceeding analyst projections.

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Growth in both the USA and global were slower than management had been expecting. "Even the U.S. number was better than I thought it would be. That's a really good number for a market that's this mature". Streaming revenue surged 36%, reaching almost $4 billion in the quarter - a performance that matched Wall Street's forecasts of $4 billion. As the company expands its capabilities internally, it found it needed more production capacity - leading to the acquisition of a studio in Albuquerque, New Mexico.

Media companies that once sold programs to Netflix for hundreds of millions of dollars are now building their own on-demand services to compete head on.

Is Netflix anxious about competition yet?

There is more uncertainty ahead as competition moves in: Apple has been beefing up its offerings, and Disney is expected to debut its much-anticipated direct-to-consumer service next year.

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"My competitors have Netflix turning cash flow positive in two years, that's just insane - it's not going to happen", Wedbush technology analyst Michael Pachter said on Yahoo Finance's "Midday Movers' show". "The game is on".

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