Netflix, the streaming video giant, blew past Wall Street forecasts for the second quarter of 2017, adding 5.2 million new subscribers, well above the company’s own estimates of 3.2 million. The company has been focusing on overseas growth recently and that seems to have paid off. It gained 4.14 million international customers and 1.07 million subscribers in the US. As of the end of June, Netflix had 104 million streaming subscribers, with 50.1% of those outside the U.S. The company said in its earnings report:
“Our quarterly guidance is our internal forecast at the time we report and we strive for accuracy. In Q2, we underestimated the popularity of our strong slate of content which led to higher-than-expected acquisition across all major territories. As a result, global net adds totaled a Q2-record 5.2 million (vs. forecast of 3.2m) and increased 5% sequentially, bucking historical seasonal patterns. For the first six months of 2017, net adds are up 21% year-on-year to 10.2m.”
On the financial front, Netflix was in line with analysts’ expected earnings of 16 cents per share on revenue of $2.76 billion, as the company posted actual earnings of 15 cents per share on revenue of $2.79 billion.
Netflix said it will continue to invest heavily in original content, borrowing money to supplement its cash flow. Free cash amounted to -$608 million this quarter, compared to -$254 million for the same period a year ago. The company expects free cash flow of -$2.0 billion to -$2.5 billion for the full year 2017.
“With our content strategy paying off in strong member, revenue and profit growth, we think it’s wise to continue to invest. In continued success, we will deploy increased capital in content, particularly in owned originals, and, as we have said before, we expect to be FCF negative for many years.”
These bets on high-quality original content seem to be paying off. Netflix racked up 91 Emmy nominations this year, a record for the company, and was second only to HBO, which had 111. Netflix expects to spend $6 billion on original content this year. Following the Q2 earnings report, the company’s stock was up more than 10 percent in after-hours trading, reaching an all-time high of more than $178 per share.