Netflix is growing again and Hollywood can breathe a sigh of relief.
The streaming leader added 2.41 million customers in the third quarter, exceeding internal forecasts as well as expectations on Wall Street. Netflix grew in all regions of the world and said on Tuesday it expects to sign up another 4.5 million users globally this period.
While Netflix is not growing as it was a couple years ago, the world’s most popular streaming network is back on a positive trajectory after erasing customer losses in the first half of the year.
That is good news for investors, who suffered steep stock-market losses when the company reported slowing growth earlier in the year.
“After a challenging first half, we believe we’re on a path to reaccelerate growth,” the company said in a letter to shareholders.
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Shares of Netflix rose as much as 12 per cent to $268.88 in extended trading after the results were out. The stock was down 60 per cent this year through the close on Tuesday in New York.
A strong series of fresh programmes attracted millions of new viewers in the third quarter. The period started with new episodes of Stranger Things, one of the most popular TV series in the world.
Netflix also released the Korean smash hit Extraordinary Attorney Woo, the movies The Gray Man and Purple Hearts, and the true crime drama Monster: The Jeffrey Dahmer Story, its second most popular English-language original series.
Revenue for the quarter grew 5.9 per cent to $7.93 billion, beating analysts’ projections.
Profit of $3.10 a share also topped estimates and the number of paying customers increased to 223.1 million.
However, it will not be all rosy going forward: Netflix is still on pace for its slowest growth in years. The company lost 1.2 million customers during the first half of the year — a decline that led investors and peers to reconsider their streaming investments.
The company estimates sales of $7.78bn this quarter, below the $7.98bn forecast by analysts. Earnings are expected to come in at 36 cents a share, a fraction of the $1.20 estimated on Wall Street.
Nonetheless, co-chief executives Reed Hastings and Ted Sarandos argue the company has plenty of room to grow.
The service accounts for about 8 per cent of TV viewing in the US and UK, two of its largest markets, and is adding market share every year, the company said in its letter. Netflix is also profitable, unlike the streaming services operated by most of its rivals.
Management plans to increase sales by introducing an advertising-supported version of the streaming service in November and charging for password sharing next year. Customers willing to watch Netflix with five minutes of advertising per hour can pay $7 a month, less than half of the cost of the most popular plan.
While investors have long judged Netflix based on the number of customers it adds every quarter, the company is trying to get them to consider more traditional financial measurements such as revenue and operating income. As a result, the company said it will no longer provide subscriber forecasts.
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