By Wenjing Yang
Shares of Netflix surged Thursday after the company said it added a record 7 million new subscribers in the fourth quarter, bringing the company’s total number of subscribers to 92 million, with nearly half of them outside the U.S.
The video-streaming giant far surpassed Wall Street expectations by signing up 5.1 million international subscribers and 1.9 million U.S. subscribers in the quarter, and dampened concerns that the company was spending too much on original productions.
“Successful series such as ‘House of Cards’ and ‘Orange Is the New Black’ have a halo effect” with audiences that helped Netflix acquire and retain subscribers, Morningstar Inc. analyst Neil Macker wrote in a research note.
Shares of Netflix rose 4 percent to close at $138.41 on Thursday.
The company said net income rose 55 percent to $66.7 million, or 15 cents per diluted share, in the fourth quarter ended Dec. 31, from $43.2 million, or 10 cents per diluted share, in the year-earlier quarter. The consensus estimate was 13 cents per diluted share, according to Bloomberg.
Netflix also estimated earnings per share in the first quarter of 37 cents, 2 cents above the analysts’ estimate.
Revenues climbed 36 percent to $2.48 billion from $1.82 billion a year ago. Analysts polled by Bloomberg were expecting $2.47 billion in revenue.
In a conference call, CEO Reed Hastings called the fourth quarter “huge” and said the company’s “big picture is remarkably steady,” considering strong user growth and international gains in the past year.
Netflix has continued to invest in programming and marketing since it launched in 130 additional territories in the world last January.
In the past quarter, Netflix launched offline viewing in countries and locations with limited or expensive bandwidth. Its newly released, first Brazilian original series “3%,” a sci-fi, post-apocalyptic thriller made in Portuguese, has gained a strong audience base throughout Latin America.
Netflix plans to invest over $6 billion on content this year, up from $5 billion in 2016. It also aims to raise its original content to 1,000 hours this year, up from 600, the company said.
Although at present the international segment is not profitable for Netflix, Macker said in his research note that it will become profitable by 2019, even with challenges posed by major competitor Amazon Prime Video, which has a similar territory footprint.
For the current quarter, the company projects 5.2 million net adds, with 1.5 million in the U.S. and 3.7 million internationally, remaining the same with last quarter’s forecast, but above analyst expectations.
Net income for all of 2016 jumped 52 percent to $186.7 million from $122.6 million. Meanwhile, revenues rose 30 percent to $8.83 billion from $6.78 billion.
