Netflix Stock Soars on Subscriber Growth

Reed Hastings Netflix - H 2015
AP Images

Reed Hastings Netflix - H 2015

The company added 3.3 million new streaming members during the second quarter.

Netflix has crossed the 60 million subscriber threshold.

The company announced Wednesday that it ended the second quarter with 62.7 million streaming subscribers. When including non-paying subscribers, Netflix has nearly 65.6 million members, up from the 64.8 million that CEO Reed Hastings had projected.  

Netflix shares, which closed down 2 percent for the day, were up as much as 11 percent during after-hours trading on the strong subscriber growth. 

Revenue was $1.48 billion for the quarter, down from the $1.65 billion that Wall Street was expecting. Earnings per share came in at 6 cents adjusted for the 7-to-1 stock split that Netflix just conducted, falling in line with the expected range of 4 cents to 9 cents. 

The company has attributed its subscriber growth to anticipation around its original programming slate, which included the second-quarter release of Orange is the New Black, Marvel's Daredevil, Sense8 and Grace and Frankie. This was the largest number of high-profile original shows to launch in the same quarter since Netflix began investing in content with 2013's House of Cards. 

Netflix says that nearly 90 percent of subscribers have engaged with original content on the streamer. The streamer also noted that the Sunday after Orange is the New Black's season three premiere set a record for global watch hours on a single day despite being up against HBO's Game of Thrones season finale and NBA finals. 

Although the company doesn't disclose ratings, Hastings said in a note to shareholders that Daredevil "debuted to strong engagement, particularly for a new show" while Grace and Frankie "has found a broad and appreciative audience around the the world." Both shows have been renewed for a second season. 

The streamer says it will spend nearly $5 billion on content next year as it invests further in its original programming including series, documentaries, stand-up specials and films. 

During the second quarter Netflix's DVD mail business served 5.3 million members and brought in $77.9 million in revenue, even as the company focuses increasingly on streaming. 

Netflix projects that it will add 3.55 million streaming subscribers during the third quarter.

During a conference call with investors, Hastings — who was wearing a black and teal BoJack Horseman sweater to promote the animated series season two premiere on Friday — commented on the competition, noting that Amazon and Hulu are seeing success from their investments into original content. "Amazon is growing very quickly in terms of total viewing hours, but so are we," he said. "Everyone is maintaining their relative share." 

Content chief Ted Sarandos also touched on the launch of HBO Now. 'When I said that we have to learn to be HBO before HBO learns to be Netflix, I meant that we have to get very good at original programming before they get really good at the technology and direct-to-consumer relationships that they're just starting to get into now," he said.