Netflix Q2 results have far outstripped its own and Wall Street expectations to result in 103.95 million global subscribers, with non-US members now in the majority
For the quarter ended 30 June 2017, the SVOD service claimed it had underestimated the popularity of its slate of content, which it said led to higher-than-expected acquisition across all major territories. Global net additions totaled a Q2 record 5.2 million, compared with a forecast of two million fewer subs. This represented a 5% sequential increase, and for the first six months of 2017 net adds were up 21% year-on-year to 10.2 million.
Looking for drivers behind the strong performance, Netflix attributed growth to its content proposition, singling out its original programmes proposition. It made specific note of programmes such as Stranger Things, The Crown, House of Cards, Master of None and Unbreakable Kimmy Schmidt.
Showing where it was gaining customers, Netflix racked up 1.07 million customers in the US to total 51.92 million and international markets added 4.14 million members to total 52.03 million. The expectation for the latter territories was 2.63 million.
In terms of business, the company posted total revenue for the quarter of $2.785 billion, $2.671 billion of which was from streaming services. Just over $1.5 billion of this latter figure came from the US. Overall, the company posted Q2 operating income of $128 million and net income of $66 million.
International revenue rose 57% year-over-year, excluding a $23 million impact from foreign exchange, while international ASP grew 10% year-over-year on a foreign exchange neutral basis. International contribution was a loss of $13 million compared with that of $28 million forecast due primarily to higher-than-forecasted paid members.
Looking forward, Netflix’s Q3 guidance assumes much of this momentum will continue but it notes that it was cognisant of the lessons of prior quarters when it over-forecasted, and concedes that there was lumpiness in net adds, likely due to demand being pulled forward into Q2. Significantly, Netflix is now forecasting that by the end of 2017 it will have positive international contribution at current F/X exchange rates. This would mark the first ever annual contribution profit from the international segment.
