Netflix shares surge 9% on big third-quarter earnings

Darnell Taylor
October 18, 2019

US online streaming giant Netflix Inc. said Wednesday that its revenue rose to 5.2 billion USA dollars in the third quarter of 2019, up 31 percent year-on-year. That said, Netflix adds that it's no longer expecting subscriber growth to increase for the full year compared to 2018's total. Global paid subscriber additions were 6.26 million, compared to the expected 6.05 million. Apple TV+ is projected to reach anywhere from 20 million to 120 million subscribers by the end of 2020, while Disney+ is expected to garner as many as 82 million subscribers by 2024. The company generated $5.42 billion in revenue, translating to $1.47 earnings per share, compared to the expected $5.25 billion and $1.05 EPS.

"We have been moving increasingly to original content both because of the anticipated pullback of second run content from some studios and because our original content is working in the form of member viewing and engagement", Netflix said. Netflix did say it expects some pressure in the short-term, but the company sees long-term growth continuing "nicely". Its net income for the quarter was US$665 million (an increase of 65% from last year).

Netflix stresses that entertainment is shifting to streaming TV and overall, NBC, Disney and Apple are helping in that regard.

In its note to shareholders this week, Netflix said: "Many are focused on the streaming wars, but we've been competing with streamers as well as linear TV for over a decade". But Netflix doesn't use Nielsen numbers because the ratings service doesn't count viewers outside of the USA and does not measure viewing on certain devices.

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In its letter to shareholders, Netflix addressed the onslaught of new streaming services that are set to arrive later this year, including Disney's (NYSE: DIS) Disney+ and Apple's (NASDAQ:AAPL) Apple TV+, as well as NBCUniversal's Peacock and WarnerMedia's HBO Max.

“While the new competitors have some great titles (especially catalog titles), none have the variety, diversity and quality of new original programming that we are producing around the world, ” said Netflix, confident in its ability to sustain itself in the face of competition. Most or even all of it was erased on Wednesday afternoon, however, when Netflix announced third-quarter earnings and crushed the Street's estimates.

Once highly secretive, Netflix has started sharing data on its most popular original programs.

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