Netflix shares jump after surprise Q4 profit, subscriber base also up

By Trevor Mogg January 24, 2013

As shareholders, analysts, reporters and other interested parties pored over Apple’s latest set of financial results Wednesday, video streaming giant Netflix published its results for the last quarter – and by all accounts, they’re not too bad.

Despite warning three months ago that a loss was likely for the final quarter of 2012, the company surprised many by reporting profits of $7.9 million on revenue of $945 million.

Netflix had been expecting to announce a loss following recent heavy investment in international markets. That investment appears to be paying off, as its subscriber base in parts of Europe, Canada and Latin America increased in the last quarter by 1.8 million to a total of 6.1 million. It also added 2.1 million new users to its US subscriber base, which now totals 27.2 million.

Even though earnings fell by $28 million from $35 million a year earlier, Wednesday’s news was received positively by investors, with shares jumping 35 percent to about $103 a share.

Speaking to the NY Times following the publication of the results, Netflix boss Reed Hastings said, “Our growth and our competitors’ growth shows just how large the opportunity is for Internet TV, where people get to control their viewing experience.”

The video streaming company has been tempting new users to its service with original content such as the soon-to-premiere House of Cards as well as new episodes of Arrested Development coming later in the year. In December it did a deal with Disney giving it exclusive US rights to movies by Walt Disney Studios films for three years from 2016.

And just last week it was reported Netflix had inked a deal with Time Warner to bring to users previous seasons of Cartoon Network shows such as Adventure Time, Ben 10 and Green Lantern. The deal also provided Netflix with exclusive streaming access for the first two seasons of TNT’s Dallas, coming to subscribers in January next year.

It might have been a good end to 2012 for Netflix, and the future may look promising, but Hastings hasn’t forgotten the mess the company found itself in back in 2011 when it upset much of its user base with a sudden and massive hike in the cost of its services, saying on Wednesday, “We’re on probation at this point, but we’re not out of jail.”

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