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Netflix hits 125 million subscribers

Apr 17, 2018, 12:37 AM | Updated: Jun 7, 2022, 4:00 pm
For Netflix, now with well over 100 million subscribers, the key to its growth has been a rapid international expansion and an aggressive investment in original content.

(CNN Money) — Even a price hike can’t slow Netflix down.

Netflix added 7.4 million subscribers in the first three months of 2018, up 50% from the same quarter a year earlier, the company reported on Monday. It now has 125 million subscribers.

The strong subscriber growth came in well ahead of Wall Street’s estimates, helping send Netflix stock up 6% in after-hours trading Monday.

Daniel Ives, an analyst with GBH Insights, called Netflix’s earnings results “eye popping” in an investor note.

“It shows the company’s aggressive international expansion strategy is bearing fruit and putting major fuel in the company’s growth engine for the rest of 2018 and beyond,” Ives wrote.

Expectations were high heading into Netflix’s earnings report. While several leading tech companies have stumbled this year amid regulatory concerns, Netflix stock has soared 60% on optimism for its original content strategy.

On a conference call with analysts, Netflix executives admitted to being surprised by the company’s current level of success.

“We’ve outperformed the business in a way we didn’t predict,” David Wells, Netflix’s CFO, said on a conference call with analysts Monday. “The business has grown faster than we expected.”

Much of that growth is now coming from overseas. The vast majority of the new subscribers last quarter, nearly 5.5 million, came from outside the United States as Netflix continues to gain ground in international markets.

During the first quarter of this year, Netflix launched 18 original series, 11 new seasons for existing original series, and 14 new original movies, according to Michael Pachter, an analyst with Wedbush.

The lineup included a new season of “Jessica Jones,” a reboot of “Queer Eye” and the launch of a new talk show from David Letterman, which kicked off with an interview with former President Barack Obama.

Related: Sorry, Hollywood. Netflix rules the media world

Netflix expects to have 700 programs available for customers in 2018. But there’s at least one area it’s not planning to expand into: news programs.

“We’re not looking to expand into news beyond the work that we’re doing in shortform and longform feature documentary,” Ted Sarandos, Netflix’s chief content officer, said on the call.

All that original content doesn’t come cheap. The company expects to spend as much as $8 billion on shows and movies this year, up from $6 billion in 2017, according to the earnings report.

Netflix has now committed $17.9 billion to streaming content deals, up from $15.3 billion a year earlier. It also reportedly coughed up $300 million to hire Ryan Murphy, the power producer behind “Glee.”

To help cover its mounting costs, Netflix hiked prices by 10% in the final quarter of 2017, to $10.99 a month for the standard service. Yet, the company’s subscriber growth continues to be trending in the right direction.

Netflix expects to add 6.2 million subscribers in the upcoming quarter, which would also come in above Wall Street estimates.

Still, Netflix continues to face stiff competition. Apple is ramping up its investments in original content. Amazon is rumored to be willing to drop $1 billion on a single TV show. Even Facebook is pushing deeper into video content. (Netflix’s CEO Reed Hastings sits on its board).

The belief among analysts like Deutsche Bank’s Brian Kraft is that Netflix has too much of a head start to lose now.

“Netflix has changed the industry in a profound way and in doing so has given itself a significant lead, making it very difficult for the traditional media companies, or even other big tech companies, to catch up,” Kraft wrote last week.

— CNN’s Paul R. La Monica contributed to this report.

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Netflix hits 125 million subscribers