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Netflix Adds 3.2M Subscribers, But Q2 Profit Declines

15 Jul, 2015 By: Erik Gruenwedel

Shares up after subscription streaming pioneer beats sub guidance

How invincible is Netflix? It posted a major drop in quarterly profit — and nobody cared.

Netflix July 15 reported second-quarter (ended June 30) net income of $26 million, which was down almost 63% from net income of $71 million during the prior-year period.

The Los Gatos, Calif.-based service also posted domestic subscriber additions of 900,000 and 2.37 million internationally. Global subscribers topped 65 million. Both tallies combined were a Q2 record and beat Wall Street projections. Thus, the market continued its love affair with Netflix’s stock.

Revenue totaled $1.48 billion, which was up nearly 30% from revenue of $1.14 billion a year ago. Lost in the quarterly euphoria surrounding largely international sub growth: Foreign losses totaled $92 million — up 613% from a loss of $15 million a year ago.

Netflix expects 2.4 million new international subs in the third quarter.

“We expect those losses to grow through the year, [with] international losses peaking next year,” CFO David Wells said on the fiscal webcast.

Finally, Netflix’s legacy by-mail disc rental service quietly generated nearly $78 million in quarterly contribution profit on a base of 5.3 million subscribers — many of whom also stream.

The contribution profit from disc rentals was down nearly $15 million due in large part that the previous-year period had more than 6.2 million by-mail subs.

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