Netflix reported solid third quarter results on Tuesday, with subscriber growth and earnings beating expectations thanks to a substantial boost from popular new content as the streaming giant looks to assert its lead over rival platforms.
While Netflix’s quarterly revenue of $7.84 billion was largely in-line with company guidance, earnings per share of $3.19 handily beat the $2.56 per share expected.
Following the earnings report, Netflix shares, which had traded largely flat during the day, jumped as much as 2% before paring back gains in after hours trading.
After a lackluster start to the year, Netflix exceeded investors’ expectations by growing total subscribers from 209 million last quarter to 213.6 million.
Overall, Netflix maintains a wide lead over other major U.S. streaming competitors like Disney+, which last reported 116 million subscribers, and HBO Max (owned by parent AT&T), with 67.5 million subscribers.
Wall Street analysts, most of whom remain optimistic about Netflix, largely predicted that the worldwide success of South Korean drama “Squid Game,” which launched in the third quarter, would provide a substantial boost to Netflix’s results into year-end.
Netflix stated earlier this year that it plans to spend a whopping $17 billion in content, a notable increase from the $11.8 billion spent in 2020 and $13.9 billion spent in 2019.
An increasing part of that spending will go towards original content, which should help Netflix “return to strong growth despite tough comps near term” and drive subscriber growth in the fourth quarter, according to a note from Bank of America.
Earlier on Tuesday, Credit Suisse analyst Douglas Mitchelson called a third-quarter earnings miss “off the table” for the streaming giant. Baird analyst Will Power, meanwhile, said that “If ‘Squid Game’ is any indicator, content is still king.”
Big Number: $900 Million.
That’s how much Netflix’s “Squid Game” series is expected to be worth, after costing just $21.4 million to produce, according to a Bloomberg report.
CEO Reed Hastings, who revolutionized the entertainment world after cofounding Netflix in 1995, is worth $6 billion, according to Forbes’ estimates. His net worth has nearly doubled in the last two years, as Netflix’s continued growth and a surge in signups during the pandemic have cemented the company’s edge in the streaming wars.
After a slow start to subscriber growth in 2021—shares also only rose 1% in the first half of the year, expectations for third quarter earnings were always going to be high. The stock has been trading well in recent months, however, up some 20% so far in the third quarter. While some experts were anticipating a recovery in the second half of the year thanks to the return of popular shows and new original content like “Squid Game,” that’s happened more quickly than expected—as evidenced by the stock’s recent trend upward, JPMorgan analyst Doug Anmuth said in a recent note.