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Netflix shakes off summer swoon, shares jump on subscriber additions

Netflix shares jumped 12 percent after reporting the addition of 7 million subscribers — and an expectation of 9.4 million more next quarter.
Image: Netflix Headquarters
Shows Netfilx headquarters in Los Gatos, Calif on March 20, 2012.Paul Sakuma / AP file

Netflix's summer swoon is now in its rearview.

The streaming giant said on Tuesday that it now has 137.1 million subscribers, sending its shares sharply higher and assuaging any fears that it would have a repeat performance of its last quarterly earnings.

In July, Netflix announced subscriber additions as part of its second-quarter earnings report that fell short of Wall Street expectations, sending its shares down 14 percent.

Netflix made up for that on Tuesday by announcing that it added just shy of 7 million subscribers in its third quarter — and that it expected to bring in another 9.4 million in the next few months. That news sent Netflix shares sharply higher in after-hours trading, up about 12 percent.

Netflix doesn’t release the viewership data of its TV shows but is judged by investors on the number of subscribers it adds each period in relation to what it is spending on original content. Netflix is by far the biggest global online streaming service and is on track to spend $8 billion on original content in 2018 — easily outpacing other streaming companies and close to what other major TV companies spend.

In the letter to shareholders, Netflix also touted its ability to create stars, including a graphic of the Instagram accounts of the actors and actresses of its shows.

The company is ramping up original production and opening a new hub in Albuquerque, New Mexico, which the company touted in its earnings letter will bring $1 billion in production over the next 10 years and create up to 1,000 jobs per year. Netflix is also preparing to release the original movie “Roma,” which has been gaining Oscar buzz. The movie is from director Alfonso Cuarón, who won an Oscar in 2014 for "Gravity."

Netflix's letter noted that it does face growing competition from the likes of WarnerMedia and Disney, which are also prepping new streaming services, as well as the other forms of entertainment.

“We compete for entertainment time with linear TV, YouTube, video gaming, web browsing, social media, DVD and PPV, and more," the company wrote. "In that competition for screen hours, we lose most of the time, but we win enough to keep growing.”