Netflix outpaces Q3 expectations, adds 5.3M new subscribers

Netflix corporate headquarters
The bulk of the new subscribers came from outside the U.S.

As it did in its previous quarter, Netflix again outpaced its own expectations around subscriber growth and added 5.3 million new subscribers during the third quarter.

The bulk of the new subscribers came from outside the U.S. Netflix added 4.45 million international subscribers during the third quarter and 850,000 new domestic subscribers. The company's U.S. total marked the first time in the past three quarters that Netflix added fewer than 1 million new domestic subscribers, but it was well ahead of the 370,000 domestic subscribers Netflix added in the year-ago quarter.

All together Netflix now has 109.25 million total subscribers (with about 104 million paid memberships). Looking ahead, the company expects to add another 6.3 million subscribers during the fourth quarter.

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While its forecast for the coming fourth quarter isn't as large as its previous fourth-quarter forecasts, Netflix seemed to point toward its recent price increases as a potential culprit for driving down additions. However, the company focused on the imminent benefits of the price hike.

“Increased revenue over time will help us grow our content offering and continue our global operating margin growth,” the company wrote.

RELATED: Netflix’s 5.2M subscriptions more than expected as Q2 revenues rise 32%

With subscriber numbers going up, Netflix also reported an increase in global streaming revenue, up 33% year over year. The company attributed the rise to a 24% increase in average paid memberships and 7% growth in average subscription prices. Operating income rose to $209 million, nearly doubling year over year, and net income came in at $130 million.

The company noted that its domestic contribution margin fell to 35.8% due primarily to the earlier-than-anticipated close of certain content deals. Looking ahead, Netflix expects its domestic contribution margin to fall below annual comparisons due to increased marketing efforts.

“We spend disproportionately in the U.S. to generate media and influencer awareness for our programming which we believe, in turn, is an effective way to facilitate word of mouth globally,” the company wrote.

Netflix's content slate could continue to grow significantly, as the company now projects it will spend between $7 billion and $8 billion next year on content.