Netflix 2018 quarter one earnings: Company beats expectations with 7.4 million new subscribers

Aggressive expansion of new original content seems to have paid off

(REUTERS/Mike Blake)

Netflix continued its run of growth with a first quarter of 2018 that yielded a better-than-anticipated 7.4m new subscriptions.

The company’s all-important indicator of paid subscriptions increased beyond its own forecast, suggesting that the streaming service’s aggressive strategy of adding new original content has paid off.

It reaped some $3.6 bn (£2.5bn) in revenue in the first quarter of the year, according to a newly released earnings report, an increase of 43 per cent over a year ago.

Netflix’s stock price has soared this year, avoiding the sharp declines that have hit the technology industry. Shares rose more than six per cent in after-hours trading following the earnings report’s release.

Analysts have been bullish on its future prospects, noting a surge of original programming that has helped the company tap into a worldwide pool of potential users.

“We continue to believe long term subscriber growth and profitability will exceed current consensus expectations as Netflix realises the global scale benefits that come from its subscriber base, distribution network and content library”, Goldman Sachs analyst Heath Terry wrote in a note earlier this month.

Earlier this year, Netflix executives announced that they intended to offer some 700 original series and 80 original movies in 2018. In its earnings release, the company noted its expanding roster of unscripted and internationally produced content.

The ramp-up has left Netflix with a persistent shortfall of free cash. The company estimated it would remain in the negative for several more years as at “rapidly grows” its spending on original content, saying it would continue to raise debt as needed.