Netflix Stock Surges as Earnings Beat Analyst Expectations

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UPDATED: Shares were up more than $5 during the regular session, but surged $32 after the closing bell.

Netflix delivered a quarterly financial report that astounded investors and caused the stock to surge 30 percent after the closing bell, mostly because of a surprise profit and guidance that blew past the estimates of analysts.

The massive increase in the stock on Wednesday amounts to a windfall for Carl Icahn, who will reap millions of dollars from an investment he made in Netflix mere months ago at an average price of $58 per share.

Netflix shares were up $5.45 to $103.26 during the regular session Wednesday but flew $32 after the closing bell.

Netflix added 2.1 million U.S. customers to its streaming business in the fourth quarter, for a total of 27.2 million. 

Netflix, which calls itself  "the world's leading Internet television network," earned $8 million in the quarter, or 13 cents per share, while analysts expected a loss. Revenue came in at  $945 million, $10 million more than analysts had predicted and up from $876 million in the same frame a year earlier.

In a letter to shareholders Wednesday, CEO Reed Hastings said deals were Disney, which kicks in beginning 2016, and Warner Bros. were a couple of the year's highlights for Netflix.

"The Disney deal is particularly significant because it is our first Pay 1 deal with a major studio in the U.S. and because of the strength of the Disney, Pixar, Marvel and Lucasfilm titles," Hastings wrote. 

Of the Warner Bros. relationship, he wrote: "This deal is significant because we are licensing directly from the producer, rather than the networks on which these shows air, allowing us to bring previous seasons to Netflix earlier than traditional network deals have accommodated."

Hastings also predicted that the Feb. 1 debut of all 13 episodes of its original show House of Cards "will be a defining moment in the development of Internet TV." Other original shows coming from Netflix this year are Hemlock Grove, Orange is the New Black, Derek, season two of Lilyhammer and season four of Arrested Development.

Hastings also had some kind words for domestic competitors, writing that "TV Everywhere, including HBO GO, continues to improve, and linear TV distributors clearly see the benefit of offering Internet TV."

He noted that Hulu, Amazon Prime and Redbox Instant have content that differs from Netflix's, but wrote that among Netflix's 100 most popular movies and 100 most popular TV shows, 113 titles are not on those competing services.

"We'll forego or not renew content that doesn't optimize for engagement and cost efficiency across the available content choices within the constraints of our budget," Hastings wrote. "This was the case when we did not renew our Starz agreement in 2011, as well as our A&E/History Channel agreement last year."

In his 10-page letter, Hastings briefly addressed Icahn's 10 percent investment in Netflix late last year. Netflix executives, he said, "have had constructive conversations with him about building a more valuable company."