Streaming giant Netflix proved there are still legs left in its membership growth, reporting 5 million new subscribers in its third quarter for a total of 282 million global members.
The Los Gatos, California, company reported revenue of $9.8 billion for the fiscal third quarter ending Sept. 30, an increase of 15% compared with the same period a year earlier. Net income totaled about $2.4 billion.
The company reported earnings of $5.40 per share, surpassing analysts’ expectations of $5.12, according to Factset. Analysts had also projected revenue of $9.77 billion.
Netflix’s performance in the third quarter was buoyed by original programming, including the fourth season of the Lily Collins-led drama “Emily in Paris” and the dramatized crime series “Monsters: The Lyle and Erik Menendez Story.”
The company is also branching out into the lucrative field of live sports with its upcoming boxing match between YouTuber Jake Paul and Mike Tyson set to air in November, as well as two NFL Christmas Day games — events Wall Street analysts will closely watch as indicators of its advertising strength.
“In the aftermath of this volatile period of media disruption, Netflix has emerged in a leadership position that few foresaw almost ten years ago,” Morgan Stanley equity analysts Benjamin Swinburne and Thomas Yeh wrote in a note to clients ahead of Netflix’s earnings release.
The company’s revenue and share of TV time suggests “a long runway of potential growth,” they wrote.
Netflix has aimed to maximize its revenues by cracking down on password-sharing among users and promoting an ad-supported tier, which costs $6.99 a month. Both efforts are being closely watched by analysts to see how they affect the company’s growth and how long they can boost profits. (Netflix has said it will stop providing quarterly membership numbers next year.)
Though membership numbers are up, some analysts have cited Netflix’s recent engagement numbers as a sign of potential challenges ahead. For the first six months of this year, Netflix reported 94 billion hours viewed, an increase of just 1% compared with the previous year. Faltering engagement could put pressure on Netflix’s ability to raise prices, wrote MoffettNathanson analyst Robert Fishman in a recent research report.
Netflix has taken issue with that analysis, saying its engagement numbers have been strong, particularly when adjusted for the effects of the password sharing crackdown.
