Netflix (NFLX) reported user growth that exceeded Wall Street expectations, underscoring a recovery for the online streamer following a rare miss in new user additions last quarter. The Los Gatos, California-based company brought on 6.96 million total new streamers, beating its own guidance of 5 million total member additions for the quarter. Wall Street had anticipated net additions of 5.069 million for the quarter. The company issued guidance that it would add 9.4 million new members in the fourth quarter of 2018.
Netflix reported earnings of 89 cents per share on revenue of $4 billion, in line with average analysts’ revenue estimates while handedly beating earnings expectations of 68 cents per share. Streaming revenue grew 36% year-over-year, while global users breached 130 million paid and 137 million total members. Netflix’s stock rose 13% in late trading Tuesday. Shares of peer internet stocks Facebook (FB) and Amazon (AMZN) each gained about 1% in post-market trading following Netflix’s earnings beat.
The streaming giant’s free cash flow in the third quarter was negative $859 million versus negative $465 million in the year-ago quarter, which the company emphasized in its shareholder letter was due to a “growing mix of self-produced content, which requires us to fund content during the production phase prior to its release on Netflix.” This has created a gap between positive net income and free cash flow net deficit, the company said. Netflix expects its free cash flow to be closer to negative $3 billion than to negative $4 billion for the full year of 2018. The company’s year-to-date free cash flow is negative $1.7 billion.
Netflix’s net member additions have accelerated, pointing to continued popularity in the streaming platform. Netflix underwhelmed last quarter after the company reported in July it had attracted one million fewer subscribers than expected, with net membership additions coming in at 5.15 million versus 5.2 million from the year-ago quarter. The stock had been up 106% year-to-date prior to its second-quarter earnings release. Shares of Netflix are down about 15% over the past three months, and the stock sank along with the broader market selloff last week.
Netflix remains a juggernaut for online streaming, and the platform accounts for 15% of all internet traffic globally, according to a recent report from Sandvine. This comes amidst increasing competition from streamers including Hulu and Amazon, which also produce original content. New online video services from WarnerMedia, Viacom, WalMart, Costco, Quibi and Apple have also been reported, adding to the competitive landscape.