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Netflix Crushed Its Own Subscriber Targets Again

By Anders Bylund – Updated Apr 17, 2018 at 3:09PM

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The streaming video giant added 7.4 million new subscribers in the first quarter, stomping management's 6.4 million guidance target. Here's how.

On Monday night, streaming video veteran Netflix (NFLX -4.49%) reported its first-quarter results. The company exceeded its own subscriber addition targets while also raising subscription prices, resulting in strong numbers across the board.

Here's a closer look at Netflix's first quarter.

Netflix's first-quarter results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change


$3.70 billion

$2.64 billion


Net income

$290 million

$178 million


GAAP earnings per share (diluted)




Net subscriber additions (U.S.)

1.96 million

1.42 million


Net subscriber additions (International)

5.46 million

3.53 million


Data source: Netflix.

As a reminder, Netflix expected to deliver first-quarter revenue of roughly $3.7 billion on the back of 1.45 million net new domestic subscribers and 4.9 million additions in foreign lands. The top-line estimate was right on track, while subscribers flocked to Netflix's services faster than projected both at home and overseas. On the bottom line, Netflix targeted earnings of $0.63 per share -- another fairly accurate hypothesis.

The guidance-beating subscriber additions were chalked up to "the growing breadth of our content and the worldwide adoption of internet entertainment." So it's a combination of Netflix's own investments into high-quality content production and a broader global trend toward entertainment options built around digital delivery channels.

A young couple cuddling up in front of the TV, smiling at the off-screen screen.

Image source: Getty Images.

Behind the raw numbers

At this point, Netflix sports 56.7 million total memberships in the domestic market and another 68.3 million abroad, making a grand total of 125 million users worldwide. That's up from 98.8 million subscribers a year ago, a 26% year-over-year increase.

On top of the rising subscriber numbers, Netflix is also raising its subscription prices. Your average Netflix subscriber paid something like $10.10 per month for their streaming services in the first quarter. In the year-ago period, that metric stopped at $9.32 per month.

The higher service prices did have to fight a slight headwind from a growth-oriented strategy. Cable and mobile service providers are bundling Netflix with their own plans in many places around the world, including right here in North America. Netflix offers these subscriptions at a discount to the bundling partner, in exchange for simpler billing and a tendency toward lower subscriber churn. Domestic bundles include mobile network operator T-Mobile and a recently launched deal with cable giant Comcast. Netflix's management likes the lower churn and sees this tactic as a growth-boosting "supplemental channel." Sounds like the company might go looking for more of these bundling partnerships.

What's next for Netflix?

Looking ahead, Netflix continues to spend lots of cash on content production while also boosting its marketing budgets. Free cash flow will stay negative for the next several years, including an unchanged full-year target of $3 billion-$4 billion for this year's free cash burn. The company expects to tap into an attractive debt market as circumstances require.

In the second quarter, Netflix expects to see domestic subscriber counts rising by 1.2 million. International additions should land near 5 million net new accounts. All in all, that would lead to approximately 41% year-over-year revenue growth, stopping at $3.93 billion. GAAP earnings should rise from $0.15 to $0.79 per share, year over year.

Anders Bylund owns shares of Netflix and T-Mobile US. The Motley Fool owns shares of and recommends Netflix. The Motley Fool recommends Comcast and T-Mobile US. The Motley Fool has a disclosure policy.

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