Netflix Subscribers Surge Thanks to 'Narcos,' 'Stranger Things'

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Netflix added 3.6 million subscribers in the third quarter, buoyed by the hit series "Stranger Things" and "Narcos," hushing skeptics of its strategy to globally dominate online TV viewing.

The world's largest online TV network rebounded from a weak second quarter, adding about 370,000 customers in the U.S., more than forecasts of 304,000. Netflix had blamed a price increase for slower growth earlier this year. The company added 3.2 million customers outside the U.S., better than analysts' average projection of 2 million.

The shares surged 20% in late trading to as high as $121.28. If those gains hold on Tuesday, the stock could reach its highest point in regular trading since January.

Investors have made Netflix one of the hottest stocks in recent years, believing the company would spur the adoption of on-demand TV outside the U.S. while continuing to revolutionize the TV business at home. The company, which will spend $6 billion in cash on programming this year, credited original series "Stranger Things" and "Narcos" with attracting new customers.

Third-quarter revenue rose to $2.29 billion, compared with the $2.28 billion average estimate, according to a statement Monday. Earnings of 12 cents a share compared with the average estimate of 6 cents. Netflix forecast U.S. subscriber additions of 1.45 million in the fourth quarter, compared with the 1 million average estimate, and international additions of 3.75 million, compared with the 3.1 million estimate. The company expects to begin reporting material profits next year, though subscriber growth will continue to slow.

"Stranger Things" is "the kind of broad appeal, cross demographic, and cross border sensation that we hope will distinguish Netflix original content," the company said. The show "is also notable as it is produced and owned by Netflix, which provides us with more attractive economics and greater business and creative control."

With 86.7 million total streaming subscribers, Netflix is relying on international markets to fuel its growth in the years ahead. The company doesn't provide much detail on its performance in specific territories, though executives have singled out Brazil and Australia as two strong markets. Canada and the U.K. are two of Netflix's largest overseas customer bases, according to analysts.

Netflix in April cautioned growth would slow after a major global expansion that started this year. The company introduced its streaming service to 130 new territories in January, completing its rollout except for China. Newer markets, especially in Asia, have proven a challenge so far.

In China, where local regulations have prevented Netflix from entering, prospects still don't look good, Chief Executive Officer Reed Hastings said earlier this month. The company said Monday it will start licensing its programming to current streaming-video providers in China.

While the rate of deceleration in the second quarter surprised investors and analysts, Netflix has maintained it would surmount any challenges with its continued investment in quality programming.

Netflix has said its expenses on shows and movies will keep rising. Original programming, which currently accounts for 10% to 20% of its content budget, will climb to 50% in the future, Chief Financial Officer David Wells has said.

-- Bloomberg News

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