Netflix’s international subscribers in 1Q18
On the international front, Netflix (NFLX) added ~5.5 million streaming members in 1Q18. The company’s international streaming membership additions exceeded the analyst’s estimate of ~4.8 million members and the company’s January forecast of 4.9 million members. Globally, the streaming giant added ~7.4 million subscribers in the first quarter, reaching a total subscriber base of 125.0 million.
International streaming growth
In an earnings letter to shareholders, Netflix stated that its international segment contributes 50.0% of its total revenues and 55.0% of its memberships in 1Q18. Netflix’s international revenues soared ~70.4% year-over-year to $1.8 billion in 1Q18, and it expects its revenues to rise 9.0% to $1.9 billion in 2Q18.
Excluding foreign exchange headwinds, the company’s international revenues and ASP (average selling price) soared 59.0% and 13.0% year-over-year, respectively. Netflix had an international contribution profit of $272.0 million in 1Q18 and a high contribution margin of 15.3% in the international segment.
Netflix’s forecast for 2Q18
For 2Q18, Netflix expects subscriber additions of 5.0 million in its international segment. However, it assumes a lower contribution margin of 14.1% in 2Q17 in comparison to 1Q18. The company also expects to have higher net additions of members in the second half of 2018 as it plans to invest more in original content and marketing.
The company expects its international members to help grow its overall subscriber base, as the company has struggled to add domestic subscribers in the past few quarters. According to Morgan Stanley analysts, Netflix’s international subscriber base is expected to reach 300.0 million by 2028.
Netflix competes with Amazon Prime (AMZN), Hulu, and Alphabet’s (GOOGL) YouTube in the streaming space. Telecom and satellite operators such as AT&T (T) and Dish Network (DISH) also offer streaming services to offset their subscriber losses.