Netflix’s corporate office proudly revealed Tuesday it’s been doing a binge of its own this quarter — for new subscribers.
That was the big takeaway from the company’s latest quarterly report on sales and profits, and the numbers were very good: Netflix said it added more than 5 million subscribers in the period from April to June, obliterating Wall Street expectations for a mere 3 million.
That’s thanks to the strength of Netflix’s programming, which also helps explain why the company is currently burning through cash at a startling rate. The company reports spending $6.9 billion in cash on streaming content in 2016, a figure that could still grow another 25 percent this year, according to Goldman Sachs’ estimates.
That spending also helps explains why, for all the excitement around Netflix, it isn’t making that much money. The company reported a second-quarter profit of only $65.6 million, or 15 cents a share, on revenue of $2.8 billion.
For the moment, nobody seems particularly worried about that ratio. And for now, at least, investors are willing to give Netflix the benefit of the doubt under the theory that the more users it acquires now, the more powerful it will be down the line.
In a note to clients following Netflix’s report, Goldman Sachs analysts specifically noted the company’s torrid spending “raises the risk profile.” But Goldman nevertheless raised its revenue, profit, and stock-price targets for the company this year, saying, “We believe that Netflix remains on track in building out an unmatched global entertainment platform.”
Here are a few other key details from Netflix’s big quarter:
– Aside from growing in raw numbers, Netflix’s subscriber base is also becoming much more global in composition. The company now has 52.03 million international subscribers, slightly more than its U.S. total for the first time in history.
– Netflix shares jumped more than 13 percent Tuesday, closing out at $183.60 a share — a gain of nearly 50 percent this year. Over the last 10 years, Netflix is up a staggering 6,200 percent.
– With all the focus on subscriber growth, Netflix investors essentially ignored the yardsticks that traditionally get more attention in earnings releases, at least in part because the company’s quarterly revenue and profit clocked in as expected.
– Hollywood traditional networks and studios are increasingly feeling the pinch of bidding against the free-spending Netflix for popular content — hence the sheer cattiness of its competitors in this New York Times dispatch from the ATX Television Festival in Austin last month.
Finally, this improbable tidbit caught our attention in the numbers Netflix released yesterday: 3.8 million people still subscribe to mail-in DVDs from the company. And they’re probably screening those for their friends too.