Netflix earned $403m on revenue of $4bn in the quarter.
In the United States, where Netflix can now claim nearly half of households as users, the company expects to add 1.8 million new customers this quarter, bringing the domestic total to 60.3 million. Subscriber growth was stronger than expected in the US and overseas. Only about 1 million of the almost 7 million new subscribers came from the United States. In overseas markets, which now accounts for 57% of Netflix' total subscription base, Netflix saw 5.8 million net new subscribers, above the 4.5 million estimate.
Netflix shares soared in after-hours trading after the earnings beat, topping $398. During that quarter, Netflix had a dearth of new programming that resonated with viewers the way hits like House of Cards and Stranger Things had done in the past. However, despite the unexpected cold shower last quarter, Netflix bulls remain confident the stock will rally. Analysts say that even if Netflix does reach its targeted 5 million new subscribers for Q3, Netflix investors can still expect more conservative growth moving forward. Netflix has prepared for this, beefing up worldwide programming and production as it approaches a ceiling in the United States.
As for earnings, Netflix generated $4 billion compared to the $3 billion it took in a year earlier.
Netflix said it expects operating margins at the lower end of the 10 percent to 11 percent range for the full year 2018.
The additions helped lift profit more than threefold to 89 cents a share, beating the 68-cent average of analysts' estimates. Those shows made Netflix "feel more local, more relevant" to local consumers, Chief Content Officer Ted Sarandos said during the call. "Even the U.S. number was better than I thought it would be. That's a really good number for a market that's this mature". Its shares are up about 90% this year.
Rivals have long groused that Netflix can spend ungodly sums without ever having to make money itself.
While WarnerMedia CEO John Stankey stated while announcing the new venture, "our job is to build a compelling offer of content....[my job] isn't to build another Netflix", it wouldn't be surprising if landing a blow against the streaming Goliath was in the back of his mind.
At the same time it faces competition from the likes of Amazon and Disney.
Is Netflix anxious about competition yet?
"My competitors have Netflix turning cash flow positive in two years, that's just insane - it's not going to happen", Wedbush technology analyst Michael Pachter said on Yahoo Finance's "Midday Movers' show".