Netflix shares are up about 9.6% in post-market trading after it reported that it added 1.1 million domestic subscribers in Q2, well ahead of the 631,000 that the Street anticipated.
The company forecasts an increase of 750,000 in Q3, topping expectations for 731,000.
Net income for the quarter, at $65.6 million was up nearly 61% vs. the period last year, on revenues of $2.79 billion, up 32.3%. The top line was slightly ahead of the analyst expectations for $2.76 billion.
But earnings, at 15 cents a share, were a penny below forecasts.
In a note to shareholders, CEO Reed Hastings says that the earnings were weighed by the timing of content releases — including the release in Q2 of season 5 of House Of Cards, which last year was out in Q1. But the company was helped by a “greater than expected tax benefit.”
With the rising outlays for content, Netflix burned through $608.4 million in cash in Q2 up from $254.1 million in the period last year. It expects to burn as much as $2.5 billion for the year.
“With our content strategy paying off in strong member, revenue and profit growth, we think it’s wide to continue to invest,” Hastings says.
The company crossed what it called “symbolic milestones” by amassing more than 100 million global streaming subscribers, now with more overseas than in the U.S. It had 51.9 million domestic streaming customers at the end of Q2, up 10.2% from last year. International subs, at 52.3 million, are up 44.3%.
On Netflix’s ambitious movie production plans — with simultaneous release for TV and theaters — Hastings says that it’s “counter to Hollywood’s century-old windowing tradition. But just as we changed and reinvented the TV business by putting consumers first and making access to content more convenient, we believe internet TV can similarly reinvigorate the film business (as distinct from the theatrical business).”
The company plans to release 40 features this year including “big budget popcorn films to grassroots independent cinema.”
In an apparent reference to the company’s cancellations of The Get Down and Sense8, Hastings says that “much as we dislike ending a series early, it consoles us that it frees up investment for another new show, or two.”