Netflix Reports Surge in New Members

Netflix Inc. reported a larger-than-expected increase in new members as the streaming video service's recent expansion helped to offset increased competition and price increases.

Monday's disclosure that it had added 3.57 million streaming subscribers in the most recent period comes a quarter after it reported the weakest subscriber expansion in two years. In July, Netflix had projected 2.3 million in additional subscribers for the September quarter.

Shares surged 20% to $119.76 in after-hours trading. Before that, the stock had fallen 13% this year as the streaming video giant has struggled to keep up the pace of subscriber growth, despite an ambitious expansion abroad.

In the U.S., Netflix added 370,000 subscribers in the September quarter, ahead of its forecast of 300,000, though it still slowed sharply from the year-ago quarter when it added 880,000 domestic subscribers.

Internationally, Netflix added 3.2 million subscribers, compared with its guidance of 2 million. While that is a boost from the year-ago quarter's 2.74 million subscribers, it is a relatively small gain considering that it launched in more than 130 countries in between.

For the current quarter, Netflix expected 1.45 million new additions in the U.S. and 3.75 million abroad, beating analysts' projections for an additional 1.3 million domestic subscribers and 3.3 million abroad, according to analysts surveyed by FactSet.

Netflix said in a letter to shareholders that it is going to explore opportunities to license its shows to other online players in China, a way to build Netflix's brand. Mr. Hastings recently said "it doesn't look good" for Netflix's prospects of entering China as a stand-alone streaming service.

The video company said the revenue contribution from China licensing will be "modest." In the long term, it still hopes to "serve the Chinese people directly, and hope to launch our service in China eventually."

Netflix said it added more international subscribers than expected in part because the impact of its original show and movie premieres was "greater than anticipated across many of our markets." The company said it expects to lose more money internationally next quarter as it invests in more original content across its global markets.

In addition, Netflix said it plans to boost its spending on content to $6 billion next year from $5 billion this year, as it increases the number of original programming hours to more than 1,000 next year from 600 hours this year. It reiterated that it expects to start delivering material global profits next year.

The company said it ended the September quarter with about 83.3 million paid memberships.

Over all, Netflix reported third-quarter profit of $51.5 million, or 12 cents a share, up from $40.76 million, or 9 cents a share.

Revenue rose to $2.29 billion from $2.1 billion.

Analysts surveyed by Thomson Reuters had projected earnings of 6 cents a share on $2.28 billion in revenue.

For the current quarter, Netflix projected earnings of 13 cents a share, compared with the average analyst estimate of 7 cents a share, according to Thomson Reuters.

Write to Maria Armental at [e-mail] and Shalini Ramachandran at [e-mail]

(END) Dow Jones Newswires

October 17, 2016 16:55 ET (20:55 GMT)

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