Netflix adds 3.6 million subs, beats Q3 earnings expectations

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Netflix adds 3.6 million subs, beats Q3 earnings expectations

Netflix avoided a rerun of last quarter's poor subscriber growth performance by blasting past expectations with nearly 3.6 million new subscribers.

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Netflix adds 3.6 million subs, beats Q3 earnings expectations

Mike Snider , USA TODAY 4:36 p.m. EDT October 17, 2016
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Netflix headquarters in Los Gatos, California, Tuesday, July 8, 2014. ((Photo: Paul Sakuma for Netflix)

Netflix avoided a rerun of last quarter's poor subscriber growth performance by blasting past expectations with nearly 3.6 million new subscribers.

The Los Gatos, Calif.-based Internet streaming video provider added 3.2 million new international subscribers and 370,000 new U.S. subscribers in the months of July-September. That far exceeds the company's forecast of about 2.3 million new subscribers, 2 million of them international and 300,000 in the U.S.

Some bullish Wall Street analysts had suspected Netflix of being conservative with its forecast, but few, if any, expected growth of more than 3 million total. Investors were also enthusiastic about the company's fourth quarter forecast of an estimated 5.2 million new subscribers from October through December.

Netflix (NFLX) shares skyrocketed on the news in after hours trading Monday, rising 19% to $118.79. Shares closed Monday down 1.65% to $99.80 and had been down nearly 13% for the year.

New original series such as Stranger Things and Luke Cage along with the second season of Narcos helped attract subscribers and keep churn to a minimum despite an ongoing monthly price hike of $2 for long-term members. "Our over-performance against forecast was driven primarily by stronger than expected acquisition due to excitement around Netflix original content," CEO Reed Hasting said in a letter to shareholders.

Netflix now has 86.7 million total streaming members.

For the third quarter, Netflix reported earnings of 12 cents, and profit of $52 million, blasting past the consensus of 5 cents and $22.3 million from analysts polled by S&P Global Intelligence.

Total revenue of $2.158 billion was in line with the company's forecast of $2.16 billion. However, analysts had expected total revenue of $2.28 billion, compared to $1.6 billion a year ago.

This sets up the company for a solid 2016, said Scott Devitt, technology analyst with Stifel Financial Corp. He estimates Netflix will add 1.55 million U.S. subscribers and 4.09 million international subscribers during this quarter. “We believe Netflix will emerge from this un-grandfathering cycle with a strong setup for subscriber growth boosted by its expanding lineup of both global and local original content,” he said in an earnings preview note to investors.

Follow Mike Snider on Twitter: @MikeSnider

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