Netflix Stock Jumps After Beating Earnings Estimates

During the third quarter, Netflix beat earnings expectations but still fell short on U.S. subscribers.

On Wednesday, Netflix released its highly-anticipated earnings report, and the results were what most investors were looking to see. The company’s subscriber base rebounded, and management addressed the multitude of streaming services that are set to launch during the fourth quarter.  

The earnings report was something of a mixed bag since Netflix showed substantial gains in many areas while falling short in others. Here is an overview of how Netflix made out during the third quarter:

  • Earnings: $1.47 per share, instead of $1.04 forecasted
  • Revenue: $5.24 billion, instead of $5.25 billion forecasted
  • U.S. subscribers: 517,000, instead of 802,000 forecasted
  • International subscribers: 6.26 million, instead of 6.05 million forecasted

Netflix’s biggest wins and losses during Q3

During the second quarter, Netflix lost U.S. subscribers for the first time since 2011. So heading into this earnings report, investors were anxious to see that the company’s subscriber base is rebounding. 

The company’s subscriber results were mostly positive, though not as good as analysts had hoped. Netflix once again fell short on U.S. subscribers, but the company did add 6.26 million international subscribers, which handily beat Wall Street’s forecasts.

Netflix announced that starting next year, it will no longer report solely on U.S. subscribers. Instead, it will report subscriber growth in four different regions: the U.S. and Canada, Europe, Asia Pacific, and the Middle East and Africa. 

And the company will only offer guidance for international subscribers. Many analysts have been calling on Netflix to do this for a while. It is challenging to predict Netflix’s paid subscribers since the company has such a large subscriber base. 

Either way, investors didn’t seem too upset over the subscriber miss. The lack of disappointment could be partly because the company’s third-quarter profitability was much higher than analysts were expecting. 

Company management downplays streaming wars

And finally, Netflix addressed the number of streaming services that will launch in the upcoming months. CEO Reed Hastings mostly downplayed the competition, stating that the company has been competing with streamers for the past 10 years. 

Hastings also pointed out that linear TV providers present more competition than Disney or Apple. “We’re all relatively small compared to linear TV,” he added.

This narrative seemed to at least momentarily sooth many investors because the company’s shares jumped as high as 10% in after-hours trading on Thursday. However, one analyst at Macquarie Research still downgraded the stock, saying the earnings report was “comforting, but competition is coming.”