Netflix, Inc. (NASDAQ:NFLX) released its latest earnings report tonight after closing bell, posting earnings of 96 cents per share on $1.41 billion in revenue. Analysts had been expecting the video streaming company to post earnings of 92 cents per share on $1.41 billion in revenue for the third quarter.
Netflix misses subscriber forecasts
Netflix said it added more than 3 million subscribers (compared to their estimate of 3.69 million), ending the September quarter with 53.1 million subscribers. Of those subscribers, 1 million of them were in the U.S., leaving Netflix with 37.22 million domestic subscribers and missing their forecast for net additions and compared to the same quarter a year ago. The company reported $877 million in domestic streaming revenue, which was in line with their estimate and a 25% year over year increase.
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The company ended the third quarter with 15.84 million international subscribers, again missing their forecast for net adds. International revenue was $346 million, which was in line with their forecast and an 89% year over year increase.
Netflix management cited the slight price increase they implemented earlier this year as being the reason for their misses on subscriber growth. However, they believe that major positive reception to season two of Orange is the New Black offset the impact of the higher prices for about two months.
Netflix guides for fourth quarter
The company said it expects to add 4 million more subscribers in the current quarter, which would put it at over 57 million subscribers around the globe. Netflix expects to see about $1.305 million in total streaming revenue and about 44 cents per share in earnings.
The company projects weak margins for the fourth quarter, as new market expenses weigh on its international contribution margins. Netflix did point out, however, that the international markets launched before this year are now collectively profitable.
Netflix also reported that its U.S. contribution margin increased to 28.6% in the third quarter. The company expects to see a 30% contribution margin in the first or second quarter of next year. At that point, they will target an average of 200 basis points in growth per year for the next years, aiming to hit a 40% contribution margin five years after they hit 30%.
**Netflix’s revenue number has been corrected to include both streaming and DVD revenue.