Streaming video pioneer Netflix this afternoon reported Q3 revenue that was in line with Wall Street’s expectations and profit that easily topped the consensus, added more subscribers than was expected, and offered an outlook for subscribers that was slightly ahead of consensus.
The report sent Netflix shares up 2% in late trading.
The company said that “After a lighter-than-normal content slate in Q1 and Q2 due to COVID-related production delays in 2020, we are seeing the positive effects of a stronger slate in the second half of the year.”
Netflix cited the success of titles La Casa de Papel and Sex Education for propelling results:
Season five of La Casa de Papel (aka Money Heist) and season three of Sex Education were two of our biggest returning shows in the quarter with 69m and 55m member households, respectively, choosing to watch these fan favorites in the first four weeks. On the heels of The Queen’s Gambit, we’ve had another limited series hit with Maid which launched just after quarter-end on October 1. We expect this story about living on the poverty line by award-winning playwright and screenwriter Molly Smith Metzler to reach 67m households during its first four weeks.
Netflix also touted the success of its big hit Korean-language series, Squid Game, which it said has been its most successful show ever:
There is no better example of this than Squid Game, a unique Korean story that first captured the zeitgeist in Korea and then globally. Released on September 17, it has become our biggest TV show ever. A mind-boggling 142m member households globally have chosen to watch the title in its first four weeks. The breadth of Squid Game’s popularity is truly amazing; this show has been ranked as our #1 program in 94 countries (including the US). Like some of our other big hits, Squid Game has also pierced the cultural zeitgeist, spawning a Saturday Night Live skit and memes/clips on TikTok with more than 42 billion views. Demand for consumer products to celebrate the fandom for Squid Game is high and those items are on their way to retail now.
Revenue in the three months ended in September rose 16%, year over year, to $7.48 billion, yielding a net profit of $3.19 a share.
Analysts had been modeling $7.48 billion and $2.57 per share.
Netflix said it added 4.38 global streaming paid memberships, above consensus for 3.78 million, to end the quarter with 213.6 million paid subscribers, a 9.4% increase.
Asia-Pacific was the biggest market gain for subs, the company said, with Latin America and the U.S. and Canada Markets growing more slowly:
For the second consecutive quarter, the APAC region was our largest contributor to membership growth with 2.2m paid net adds (half of total paid net adds) as we are continuing to improve our service in this region. In EMEA, paid net adds of 1.8m improved sequentially vs. the 188k in Q2 as several titles had a particularly strong impact. The UCAN and LATAM regions grew paid memberships more slowly. These regions have higher penetration of broadband homes although we believe we still have ample runway for growth as we continue to improve our service.
Netflix said it has begun testing a fledgling video game development effort, which it announced in Q2’s report:
We’ve begun testing our games offering in select countries. It remains very early days for this initiative and, like other content categories we’ve expanded into, we plan to try different types of games, learn from our members and improve our game library. During Q3, we acquired Night School Studio, the maker of critically acclaimed games like OXENFREE, to help build out our game development capabilities. 4 As a reminder, games on Netflix will be included in members’ subscriptions and will not have advertisements or in-app purchases so game play is purely focused on enjoyment versus monetization.
For the current quarter, the company sees revenue of $7.7 billion, and EPS of 80 cents a share. The company expects to add 8.5 million global streaming paid memberships. That compares to consensus for $7.7 billion, a $1.12-per-share profit, and 8.4 million net adds.