Netflix shares shot up by nearly 21% in after-hours trading Monday afternoon, after the company shattered its Q3 2016 earnings expectations with net income soaring to $51.52 million (12 cents a share), compared to $29.43 million (7 cents) in the same period one year ago.
Quarterly global streaming revenue exceeded $2 billion for the first time, rising 36% year over year to $2.158 billion. Netflix pointed to the breakout success of sci-fi thriller Stranger Things and the second season of Narcos as key catalysts for the streaming media company.
“On a constant currency basis, this represents 39% year-over-year revenue growth, a 400 basis point acceleration from the last two quarters,” the company said in a letter to investors distributed after market close.
Among the key highlights of Netflix’s numbers:
- U.S. streaming revenue climbed to $1.3 billion in Q3 2016, from $1.06 billion in the same period a year ago.
- International streaming grew to $853 million in the quarter, from $517 million in Q3 2015.
- Global paid memberships rose to $83.28 million, from $66.02 million a year earlier. This was fueled by international streaming, wheras domestic membership growth is being achieved at a much slower rate. Still, the 370,000 new paid members in Q3 2016 beat Netflix’s forecast of 300,000.
“We kicked off Q3 with the release of Stranger Things on July 15 to both critical and audience acclaim,” Netflix said in a Q3 letter to investors. “This nostalgic, supernatural thriller proved to be the blockbuster of the summer and is the kind of broad appeal, cross demographic, and cross border sensation that we hope will distinguish Netflix original content.”
Stranger Things is also notable as it is produced and owned by Netflix, which provides the company “with more attractive economics and greater business and creative control,” it says.
In 2017, Netflix intends to release more than 1,000 hours of premium original programming, up from over 600 hours this year.
“Over the long run, we believe self-producing is less expensive (including cost of capital) than licensing a series or film, as we work directly with the creative community and eliminate additional overhead and fees,” Netflix said. “In addition, we own the underlying intellectual property, providing us with global rights and more business and creative control. Combined with the success of our portfolio of originals and the positive impact on our member and revenue growth, we believe this is a wise investment that creates long term value. Consequently, we plan on investing more, which will continue to weigh on free cash flow.”