Netflix beats subscriber estimates by over one third in Q4 2016

REUTERS/Mike Blake/File Photo

(Reuters) – Netflix added over a third more subscribers than expected in the last quarter of 2016, a sign of success for its ambitious global expansion that sent its shares up 8% in extended trading.

Netflix signed up 7.1 million new subscribers globally, far more than the 5.2 million analysts had expected, according to research firm FactSet, beating targets at home and abroad even as it raised prices.

Original shows like “Marvel’s Luke Cage” and British drama “The Crown” performed strongly around the world, Netflix said, noting that competitors were adapting to compete. recently expanded its Amazon Prime Video service globally, and Britain’s BBC announced plans to release entire series at once to allow the “binge watching” popularized by Netflix.

“It’s becoming an internet TV world, which presents both challenges and opportunities for Netflix as we strive to earn screen time,” the company said in its quarterly letter to shareholders.

Netflix, in its earnings report, said it added 5.1 million subscribers outside the United States and 1.9 million in its home market in the quarter ended Dec. 31.

Analysts had forecast 3.73 million non-US additions and 1.44 million at home.

“The future battleground at home is now in keeping hold of customers as much as it is in trying to acquire new ones,” said Neil Saunders, head of retail analyst firm Conlumino.

“In our view, the fact that consumers have readily absorbed the price increase, and that Netflix has continued to advance its subscriber numbers in spite of it, indicates the company is now firmly in pole position in the streaming arena.”

Netflix said it planned to release more than 1,000 hours of original programming this year, up from 600 hours last year. It recently signed a deal with comedian Jerry Seinfeld to stream his show “Comedians in Cars Getting Coffee” as well as two new stand-up specials and other shows he will develop.

The Los Gatos, California-based company said revenue rose 35.9% to $2.48 billion in the December quarter. Analysts on average had expected $2.47 billion, according to Thomson Reuters I/B/E/S.

The company said it expected to add 1.50 million subscribers in the United States in the current quarter, fewer than the FactSet estimate of 1.79 million.

In international markets, Netflix said it expected to add 3.70 million subscribers, above the average estimate of 3.05 million.

The company projected negative free cash flow of about $2 billion in 2017, up from negative $1.7 billion in 2016.

Up to Wednesday’s close of $133.26, Netflix’s stock had risen 33.5% since it reported third-quarter results in October.

Netflix rose as much as 8.2% in after-hours trading, adding nearly $5 billion to the company’s stock market value.

(By Lisa Richwine and Anya George Tharakan; Reporting by Anya George Tharakan in Bengaluru; Editing by Peter Henderson and Richard Chang)

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