Netflix smashes Q2 EPS expectations; climbs to 30M domestic subscribers

Netflix smashes Q2 EPS expectations; climbs to 30M domestic subscribers

Summary: It has been a good month for Netflix -- both on the Emmys watch list and the balance sheet.

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Last week, Netflix racked up a bevy of Emmy nominations with House of Cards and Arrested Development.

The online rental service earned quite a bit of praise for pushing the envelope with a new distribution model, but it's time to see what the bottom line is for Netflix.

And the bottom line looked good enough as the online streaming giant hovered around the revenue target but smashed earnings expectations.

The Los Gatos, Calif.-based company reported a second quarter net income of $29.47 million with earnings of 51 cents per share (statement). Non-GAAP earnings were 49 cents per share on a revenue of $1.069 billion.

Wall Street was looking for earnings of 40 cents per share on a revenue of $1.07 billion.

Furthermore, Netflix added roughly 630,000 domestic subscriptions in Q2, bringing the grand total for the U.S. subscriber base to roughly 30 million. Netflix has another eight million now worldwide.

However, the subscription results fell below expectations of closer to 700,000.

Netflix CEO Reed Hastings and CFO David Wells skirted around why this happened in prepared remarks:

We generally expect net additions in Q2 to be lower than prior year Q2 due to increased net-add seasonality as we grow. This Q2, however, was an exception, we believe due to the launch of Arrested Development. This show already had a strong brand and fan base, generating a small but noticeable bump in membership when we released it. Other great shows don’t have that noticeable effect in their first season because they are less established.

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More points to know from Netflix's Q2:

  • Q2 streaming revenue was up 26 percent domestically and 155 percent internationally on an annual basis.
  • DVD subscriptions: Stands at roughly seven million; Revenue contributions declined 19 percent annually
  • Hastings and Wells hinted at a fifth season of Arrested Development, if Netflix determines whether or not there is enough interest from the fan base.
  • Netflix is rolling out profile features in Q3 for different members within the same household.
  • Netflix expects Q3 net subscriber additions to be higher on an annual basis.

GUIDANCE

For the third quarter, Wall Street expects Netflix to deliver earnings of 45 cents per share on a revenue of $1.10 billion.

Netflix provided Q3 guidance for consolidated global earnings to fall between 30 and 56 cents per share.

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Chart via Netflix Investor Relations

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3 comments
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  • Good on Netflix, but if they wanted money and subscribers...

    ... all they have to do is do with Firefly what they did with Arrested Development. Seriously, when have you logged in to Netflix and NOT seen Firefly among the "Popular on Netflix" titles? But, they continue to ignore the show, saying there's not enough interest.

    Have your way Netflix. I still enjoy your offerings, but you're sitting on an untouched gold mine.
    Ndiaz.fuentes
    • WOOT for Firefly.

      'nuff said.
      Jacob VanWagoner
  • The subscriber numbers are not the be-all end-all.

    With 30-day free trials, I know quite a few people who take multiple free trials using different credit cards. Then they drop it as soon as they have to start paying. Since many subscribers are single and therefore can't be in 2 places at once, they let someone else use their account, since Netflix allows 2 simultaneous streams per account.
    Jacob VanWagoner