- Netflix shares were up 14% in pre-market trading on Wednesday.
- The video streaming titan beat Wall Street forecasts for revenue and profits in the third quarter.
- Netflix added 2.4 million subscribers after losing 1.2 million in the first half of this year.
Netflix shares rallied up to 14% in pre-market trading on Wednesday, after the streaming giant’s third-quarter earnings beat Wall Street’s revenue and profit forecasts.
The company added 2.4 million subscribers globally, it said in its earnings report released after the market closed on Tuesday. That growth in its base comes after two consecutive quarters of decline.
Netflix benefited from the release of several popular shows over the period, including “Monster: The Jeffrey Dahmer Story” and the fourth season of “Stranger Things”.
The online video service recorded a 5.9% increase in revenue to $ 7.9 billion, but higher operating costs meant its net income decreased by 3.5% to $ 1.4 billion. Analysts interviewed by Refinitiv expected $ 7.8 billion and $ 959 million, respectively.
Netflix’s quarterly subscriber growth was more than double its forecast of 1 million, after losing 1.2 million members in the first half of this year. The company ended the period with 223 million subscribers and drove towards adding another 4.5 million subscribers this quarter.
“Thank God we’re done with shrinking quarters,” co-CEO Reed Hastings said during Netflix’s earnings call on Tuesday.
The return to growth signals that Netflix could hold its own against Disney Plus, Apple TV, HBO Max, and other rivals. However, questions remain about Netflix’s successful launch of an ad-supported level of content and whether the company will be able to crack down on password sharing as intended.
Billionaire investor Bill Ackman built a billion-dollar stake in Netflix earlier this year, only to dump it three months later at a $ 400 million loss.
But the Pershing Square boss said he had doubts about Netflix’s potential market size given the number of people using the service without paying. Additionally, he has lost faith in his estimates of the company’s future cash flows with advertising in the mix.
Shares of Netflix were down 60% for the year as of Tuesday’s close, representing a roughly $ 160 billion drop in market capitalization.
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