Netflix First-Quarter Earnings Beat Expectations
UPDATED: The company says it added 2.25 million streamers to its U.S. service, and it slams the proposed merger of Comcast and Time Warner Cable. Comcast responds.
Netflix bested expectations with its first-quarter financial results, which were released Monday after the closing bell on Wall Street. The company also added 2.25 streaming customers to its subscription service, exactly the number it had predicted.
Netflix earned 86 cents per share in the first quarter, beating the 83 cents per share that analysts had forecast, and revenue was $1.27 billion, about exactly what analysts had predicted.
In the same quarter a year ago, Netflix earned 31 cents per share on revenue of $1.02 billion.
Net income was $53 million, up from $3 million in the same quarter last year.
Netflix ended the fourth quarter last year with 33.4 million total streaming customers in the U.S. and it ended the first quarter this year with 35.67 million.
Internationally, the company added 1.75 million streaming customers in the quarter for a total of 12.68 million.
Shares of Netflix are up about 112 percent in the past 12 months, though they are down a fraction of 1 percent so far this year. On Monday, the stock closed 1 percent higher to $348.49 and were surging 7 percent after the closing bell.
In a letter to shareholders made public on Monday, CEO Reed Hastings said Netflix was changing the way it markets itself to focus on original series like Orange Is the New Black and House of Cards.
"Original series represent a tremendous opportunity to raise awareness of, and build consumer enthusiasm for, the Netflix brand," Hastings said in the letter. "We'll be investing more in marketing high-quality exclusive content and spending less on direct-response advertising such as banner ads touting free trials."
Hastings also praised Comcast in his letter for its quality Internet service, but also disparaged it for its plan to merge with Time Warner Cable.
While AT&T's fiber-based U-verse "has lower performance" than many DSL providers, "Comcast is providing a much-improved Netflix experience to their broadband subscribers," Hastings writes.
Later in his letter, the CEO writes: "If the Comcast and Time Warner cable merger is approved, the combined company's footprint will pass over 60 percent of U.S. broadband households. … Comcast is already dominant enough to be able to capture unprecedented fees from the transit providers and services such as Netflix. The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers. For this reason, Netflix opposes this merger."
Late Monday, Comcast issued a statement to the press saying that Netflix's claims are "inaccurate."
"There has been no company that has had a stronger commitment to openness of the Internet than Comcast and we are the only ISP in the country that is currently legally bound by the FCC's vacated net neutrality rules," Comcast said. "In fact, one of the many benefits of our proposed transaction with Time Warner Cable will be the extension of net neutrality protections to millions of additional Americans."
In his letter to shareholders Monday, Hastings also reiterated that a price increase is coming.
"Our current view is to do a one or two dollar increase, depending on the country, later this quarter for new members only," Hastings wrote. "These changes will enable us to acquire more content and deliver an even better streaming experience."