Netflix’s stock surged 20% after hours on Monday as original hit shows like “Stranger Things” and “Narcos” helped the streaming video company crush Wall Street expectations.
Netflix beat on both international and domestic subscriber additions by a hefty margin, as well as on EPS. Netflix’s revenue was roughly in line with Wall Street forecasts.
Here are the key numbers:
Q3 EPS (GAAP): $0.12 versus Wall Street forecasts of $0.06, and Netflix’s guidance of $0.05. Q3 Revenue: $2.29 billion, up 36% year-over-year, versus Wall Street forecasts of $2.28 billion. Q3 US subscriber growth (net additions): 370,000 versus Wall Street forecasts 304,000 compared to Netflix guidance of 300,000. Q3 international subscriber growth (net additions): 3.2 million versus Wall Street forecasts 2.0 million, in line with Netflix’s guidance. Q4 subscriber growth guidance (domestic): 1.45 versus Wall Street forecasts of 1.0 million. Q4 subscriber growth guidance (international): 3.75 million versus Wall Street forecasts of 3.1 million.
Netflix credited its huge beat on subscriber additions to “excitement around Netflix original content.” The company particularly mentioned cult hit “Stranger Things” and the second season of “Narcos.”
One Wall Street concern going into Netflix’s earnings was its US price hike, termed “un-grandfathering,” which started in May and continued to roll out this quarter. “By the end of Q3’16, we had un-grandfathered 75% of the members that are being un-grandfathered this year and the impact has been consistent with our expectations,” the company wrote.
Internationally, Netflix mentioned its localization efforts in both Poland and Turkey, which Wall Street analysts suggested was spurring interest in the service over the last few weeks.
“We began accepting payment in local currency and added a local language user interface, subtitles and dubbing as well as some local content. We have seen nice gains in viewing and retention and we’ll undertake other localization efforts in the coming months and years,” Netflix said.
As for China, Netflix said it has no immediate plans to enter the country.
“The regulatory environment for foreign digital content services in China has become challenging,” the company said. “We now plan to license content to existing online service providers in China rather than operate our own service in China in the near term. We expect revenue from this licensing will be modest.”
Netflix said it would release a whopping 1,000 hours of original shows and movies in 2017, up from over 600 hours in 2016.