Netflix adds record 8.8m new subscribers and doubles profits

Netflix added a record 8.8 million new paid memberships in the last quarter of 2018, taking the total number of subscribers to 139 million.

The streaming service almost doubled operating profit in the fourth quarter – it rose from $245m (£189m) in the last three months of 2017 to $447m – and revenue grew to $3.7bn from $3.3bn.

In spite of the strong numbers, the company’s stock tumbled almost 4 per cent in after-hours trading.

Analysts offered a few reasons for the share price decline, including the fact that revenue narrowly missed expectations.

Meanwhile, although Netflix reported annual profit of $1.6bn, the company spent $13bn on ramping up production of original content such as Bird Box and Roma.

The company also recently announced that it would raise subscription prices for its 58 million US users, the first price hike since 2017.

George Salmon, equity analyst at Hargreaves Lansdown, said it was notable that Netflix is “now confident enough to use price increases to slash its cash flow deficit even faster”.

“You can only squeeze customers so far, but we think there’s a way to go before the pips squeak. The average customer spends around 10 hours a week on the service, which works out at around 25 cents an hour. Hard to argue that isn’t value for money,” he added.

“The worry, of course, is that international bruisers like Disney and Amazon aren’t going to go down without a fight, and both have the financial clout to counterpunch pretty hard. The battle for viewers’ eyeballs is only just getting started.”

Analysts also pointed out that Thursday’s share price movement should be taken in the context of 50 per cent stock growth since Christmas Eve.

“The fact that investors reacted negatively to what amounted to a strong performance indicates the extent to which Netflix has set a high bar,” said Paul Verna, media analyst at eMarketer.

“The bottom line is that Netflix remains the uncontested leader in the subscription video space.”