Netflix Inc.’s (NASDAQ:$NFLX) shares are rising on July 18 following the company’s second quarter earnings report — which was released the previous night. The stock hit all-time highs at around 11:50 A.M. EDT after rising 13.1% overnight.
Judging by Netflix’s stock movement, it is pretty safe to say that the popular video-streaming company’s second earnings report was extremely positive. Earnings per share (EPS) on sales followed the estimations of Netflix’s management: $0.15 per share on sales of roughly $2.8 billion. But that’s not the main reason why investors are suddenly interested in Netflix’s stock. That can be attributed to the fact that the number of new subscribers to the video-streaming site in the second quarter went far beyond expectations.
Netflix’s management estimated about a total of 600,000 new subscribers in the U.S. and 3.2 million new subscribers internationally in the second quarter. However, the company’s second quarter earnings report showed that in the U.S., Netflix gained 1.1 million subscribers while internationally, 4.1 million new subscribers signed up.
Netflix attributed the unexpected number of new subscribers to the original content — from TV shows to movies — that the company has been distributing on its site. House of Cards, an extremely popular Netflix TV show, released its fifth season in the second quarter. The release date was different from its usual dates in the first quarter. As well, Netflix’s new show 13 Reasons Why gained global attention through the show’s handling of several controversial topics.
Management took note of the subscriber growth this quarter, writing in a statement, “We underestimated the popularity of our strong slate of content which led to higher-than-expected acquisition across all major territories.” As such, the company has upped its production commitment by an additional 10%. As well, 2017’s negative free cash flow guidance has also been increased by an additional 10%.
In the company’s third quarter, Netflix hopes to acquire another 4.4 million subscribers. Based on the numbers this quarter and Netflix’s goal for the third quarter, the total international operating profits this year is looking extremely strong.
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