Several minutes ago Netflix smashed market expectations with its fourth quarter financial performance. Following that report, the company’s stock price shot higher, gaining more than 30 percent in after-hours trading.
Why? In short because the firm’s international expansion into Nordic countries didn’t drive it into unprofitability for the quarter. This was a surprise. The company, at the end of its third quarter, predicted a loss. Analysts anticipated a $0.13 cent per share loss. Instead, the firm earned $0.13 a share.
In Q4, as we launched the Nordics, we expect international contribution losses to increase to approximately $113 million (guidance midpoint) as we will have incremental content and marketing expenses but minimal revenue yet from this market. We intend this to be our peak quarter of international losses, and expect international losses will decline quarter by quarter next year.
Once we’ve substantially reduced international losses, and with Netflix then being solidly profitable on a global basis, we will launch our next round of international expansion.
However, instead of having negative results along those lines, Netflix crushed the quarter.
You might think that, given the surprisingly strong performance with its Nordic expansion, the company would be ready to accelerate its international expansion. This isn’t the case. Instead, the company plans a very cautions first half of the year, and perhaps new markets in late 2013 and 2014:
Here’s Netflix today:
For the first half of 2013, we aren’t planning to launch additional international markets. We are evaluating several expansion markets for late 2013 or 2014, but have not made any decisions yet. Our launch in the Nordics was very successful, confirming our belief in the large international opportunity for our service.
Strong quarter or not, Netflix appears to be focused on staying on the positive side of profitable. Even though the company has enough cash to survive losses, profits might help it expand its content – both original and licensed – at a quicker pace.
Top Image Credit: Jamie