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Investors seemed happy with news that Netflix added 2.05 million additional subscribers in the U.S. for Q4 2012, pushing the company’s stock up a whopping 35 percent at its peak to $139.32 in after hours trading.

Netflix reported a total of 27.2 million domestic subscribers, which exceeds the company’s initial guidance for the quarter. Also, Netflix managed to turn a Q4 profit of $8 million (13 cents a share) on $945 million in revenue.

Subscriber growth is one of the big things investors are looking to judge how much of a risk Netflix is taking. Not only is Netflix spending boatloads of money on the recent content deals with Disney and Warner Bros., it’s also spending money to produce original programming and grow in international markets. And since Netflix is using money from its domestic subscription business, U.S. growth is pretty important.

Netflix’ also beat its guidance for international subscribers, adding 1.8 million new customers for the quarter for a total of 6.1 million and 33.3 million overall.

Netflix investors weren’t pleased with the company’s Q4 predictions back in October, punishing its stock over high operating costs and lower-than-expected subscriber growth. Netflix estimated its domestic subscribers would hit 26.4 million to 27.1 million (up from 25.1 million in Q3), and international subscribers between 5.2 million and 5.9 million (up from 4.31 million last quarter). As for net income, Netflix estimated between a $13 million loss and $2 million profit.

Additionally, Netflix is estimating growth of 28.5 million to 29.2 million domestic streaming subscribers in Q1 2013.

“Looking forward, we expect this year’s Q1 net additions to be slightly higher than last year’s Q1 net additions of 1.7 million,” Netflix CEO Reed Hastings said in a letter to shareholders. “The fact that our growth remains this strong despite intensifying competition, and our already substantial U.S. market penetration, underlines the large opportunity ahead.”

The first quarter of 2013 will greater competition from Amazon Prime Instant Video, new comer Redbox Instant, and Hulu Plus.

Photo via MacLife


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