Netflix Inc. has begun to reshape the TV business overseas just as it has at home.
The streaming-video provider scored a record second quarter, according to a statement Monday, surpassing forecasts for subscriber growth and boosting its international audience past the domestic total for the first time. The company’s shares surged in late trading.
Netflix’s blend of TV shows, movies and stand-up comedy has started to catch on in some of the biggest countries in the world, from Brazil to the U.K. The company will be in at least 20 percent of broadband households in five of its largest markets outside the U.S. by the end of the year, according to Instinet.
The streaming-video provider signed up 5.2 million subscribers in the second quarter, 2 million more than analysts had forecast. The company said 4.14 million of those new viewers came from outside the U.S., bringing the international total to more than 52 million. International operations will be profitable for the first time this year, Netflix said.
The company will spend more than $6 billion on programming in 2017 to offer that global audience a little bit of everything. While most of the budget reflects shows licensed from big Hollywood studios, the company is releasing a dizzying array of new shows and movies of its own, including new series set in Spain, South Korea and Mexico during the quarter.
Shares of Netflix soared as much as 11 percent to $179.45 in extended trading, showing investors continue to forgive minuscule profits for growth in subscribers, which soared to almost 104 million in the period. The stock is up 31 percent this year.
All that growth comes at a cost. Net income of $66 million, or 15 cents a share, fell short of the 16-cent average of analysts forecasts, even while up substantially from a year earlier. The company raised another $1 billion in the quarter to fund original programming, and will not be cash flow positive for years to come.
But investors won’t care so long as the subscriber growth continues. The company projects it will add 4.4 million new subscribers in the current third quarter, compared with the 3.96 million average of analysts’ estimates. Netflix forecasts net income of 32 cents a share, on revenue of $2.97 billion. That compared with analysts’ estimates of 23 cents and revenue of $2.88 billion.
For the second quarter, Los Gatos, California-based Netflix signed up 1.07 million U.S. customers, easily beating the 633,000 average of analysts’ estimates compiled by Bloomberg. Total sales grew to $2.79 billion, compared with projections of $2.76 billion.
Having already surpassed 50 million customers in the U.S., Netflix has fixated on adding customers abroad, especially in Latin America and Europe. The company recently opened a customer-service center in Amsterdam that will employ at least 400 people by next year.
Netflix has promised international markets will be a source of new customers for years to come. Co-founder and Chief Executive Officer Reed Hastings has held up Facebook and YouTube as models for his company. He wants 80 percent to 90 percent of the company’s audience to be outside the U.S. — suggesting the company sees a global market of 450 million subscribers or more.
Netflix first moved overseas in late 2010, expanding to Canada, which remains the service’s largest international market, according to estimates by Anthony DiClemente, an analyst with Instinet LLC. The U.K. and Brazil are Netflix’s two largest markets outside the U.S. and Canada, while Germany is next.
Some media companies and authorities have been less welcoming to Netflix than consumers. The Cannes Film Festival vowed not to show Netflix movies next year if the company doesn’t released them in French movie theaters. Local broadcasters have united to produce programs so they can compete for projects with the free-spending U.S. service.
Yet pay-TV operators and internet providers are more sanguine. Altice NV recently struck a deal to offer Netflix as an add-on to its internet service in France, Portugal, Israel and the Dominican Republic.
Netflix has long downplayed competitive threats, arguing there would be many winners in the shift to online TV. Yet it is spending money to create enough programming so that viewers have little reason to watch anything but Netflix. The company’s long-term commitment to programming totals $15.7 billion.
In the second quarter, Netflix released more than 50 new programs, spanning 14 original series, 13 stand-up comedy specials, nine original films, seven original series for kids, six documentaries and two documentary series. The company doesn’t release viewership figures for any of its programs, though it has called out older shows “House of Cards” and “Orange Is the New Black” as hits in the past.
Some of the new shows failed. The company canceled “Girlboss” after the first season and a handful of other shows in the quarter. But enough have pleased consumers and critics. Netflix earned 91 Emmy nominations last week, the most in company history and second only to Time Warner Inc.’s HBO.
“Even as we have increased our volume of originals across several genres, we continue to grow the recognition for the quality of those shows, including brand new series,” the company said in its letter to shareholders.