Does Netflix Expect Gains in Its International Business in 3Q16?

Netflix (NFLX) expects its international streaming revenue to be $846 million in 3Q16. The company expects its total number of memberships in international markets to be 38.1 million in the quarter, with a net addition of 2 million members.

Early in 2016, Netflix expanded to around 130 countries. As the company expands rapidly to international markets, it expects to grow in these markets over a multiyear period. Netflix’s international average selling price rose 8.7% in 2Q16, excluding the impact of currency fluctuations.

The company expects to be on track to add 2 million international memberships in international territories as it continues to offer a mix of English and local language content in these areas.

As the chart above shows, Netflix had a contribution loss of $69 million in 2Q16, and it expects this loss to widen to $95 million in 3Q16. The company stated in its 2Q16 earnings letter to shareholders that it expected narrowing contribution losses in its established international markets to fund its investments in newer international territories.

The company also said that it expected the international markets in which it launched from 2010 to 2013 to collectively deliver a contribution profit of $500 million in 2016.

The company reiterated that it expected “to run around breakeven on a net income basis in 2016 and to generate material profits in 2017 and beyond.”