Netflix on Monday reported adding 7.41 million streaming subscribers globally in the first quarter—a new Q1 record for the company—beating its own estimate of 6.35 million.
The total, up 50 percent year-over-year, was bolstered by the addition of 5.46 million international subscribers, compared to the 4.9 million the company expected to add. Domestically, Netflix added 1.96 million streaming subs, above the forecasted 1.45 million. In a note to shareholders the company said its international segment now makes up 50 percent of revenue and 55 percent of memberships.
Netflix now touts 125 million total subscribers. Looking ahead to Q2, the company expected to add 6.2 million subscribers, including 1.2 million in the U.S. and 5 million internationally.
Netflix shared climbed 6 percent in after-hours trading Monday.
The streaming giant reported $3.7 billion in revenue, a 40.4 percent jump year-over-year, and net income of $290 million (diluted earnings per share of 64 cents). Netflix noted its streaming revenue was up 43 percent in Q1, “the fastest pace in the history of our streaming business,” thanks in part to a 25 percent increase in average paid streaming memberships.
As usual, in the letter to shareholders Netflix did not shed any light on viewer numbers for specific content, but continued to talk up its scripted and unscripted original series like Grace and Frankie, Marvel’s Jessica Jones, Queer Eye and Nailed it.
Netflix also added some color to its recent move to strike deals for bundled offerings. This includes a deal with British pay TV operator Sky, and an agreement announced last week with Comcast for the service to be bundled with certain Xfinity packages. Last year the streaming giant inked similar deals with Proximus in Belgium, SFR Altice in France, and T-Mobile in the U.S.
On an earnings call Gregory Peters, chief product officer at Netflix, said they’ve taken the retention and acquisition characteristics of those deals “to be very very beneficial.”
“We love the fact that we can work with these partners to access whole new groups of consumers, make it easy for them to find out about Netflix, to sign up and have a great way to access the service and watch more and more,” Peters said.
He added that the company will leverage this evolving strategy globally, including new markets.
While the company maintained it remains a primarily a direct-to-consumer business, Netflix said it sees the bundling initiative as “an attractive supplemental channel.”
Negative free cash flow for the quarter was $287 million, and the company expects to continue to be free cash flow negative for “several more years” as it ramps up original content spending. The company plans to spend between $7.5 billion and $8 billion on content in 2018, focused mainly across a range of original series, films, comedy specials and non-English language content.
The company has been aggressively pursuing original programming in part because it has been helping to grow the business, but also because quality licensed content has become scarcer, Netflix Chief Content Officer Ted Sarandos said.
“The ecosystem that produces that content that we’re buying in second windows and sometimes third windows isn’t producing content at the level of demand and quality that it had been over the years, Sarandos said. “So the things that we’re engaged in bidding on are more selective, and there’s less of them.”
