Shares of Netflix Inc. soared 19% in after-hours trade Monday after the company reported much stronger-than-expected earnings per share.
The streaming company generated net income of $51.5 million, up 75% vs the period a year ago, on revenues of $2.29 billion, up 31.7%.
Next quarter, the company anticipates it will add 1.45 million new US subscribers and 3.75 million worldwide subscribers, down a bit from previous year due to churn from the "un-grandfathering" of subscribers with cheaper subscription plans. In April, Amazon announced it would offer a standalone subscription to its Amazon Video streaming content. Amazon prices the service at $8.99, $1 less than Netflix's monthly charge. In July, Netflix had projected 2.3 million in additional subscribers for the September quarter. Before that, the stock had fallen 13% this year as the streaming video giant has struggled to keep up the pace of subscriber growth, despite an ambitious expansion overseas. Netflix beat its projections by adding 370,000 subscribers in the US during the quarter, and its strong global growth - 3.2 million subs - was enough to push the company past its conservative estimates. One region it has yet to launch in is China and now the company is saying that it will license its content to online service providers in China instead of operating its own service there. "The regulatory environment for foreign digital content services in China has become challenging", the company wrote. The company says it will generate more than 1,000 hours of "premium original programming" next year, up from 600 hours this year. That compares to consensus for 2.319 million. Analysts on average expected per-share profit of 6 cents - compared with Netflix's guidance for 5 cents - and $2.28 billion in revenue.
One Wall Street concern going into Netflix's earnings was its U.S. price hike, termed "un-grandfathering", which started in May and continued to roll out this quarter.