International membership guidance
Netflix (NFLX) is expanding its international market presence, driven by the company’s strategy of offering local content for every non-English speaking country in which it operates. In the second quarter, Netflix expects to gain nearly 5.0 million subscribers, reflecting 31.9% YoY (year-over-year) growth.
In the last four quarters, Netflix easily outperformed its international subscriber guidance. The company may maintain the same trend in the upcoming quarter, buoyed by the execution of its aggressive market expansion strategy.
From the graph above, we can see the strong international subscriber growth in the last five quarters. During this period, the company’s total international membership grew at a CAGR (compound annual growth rate) of 9.3%.
In the first quarter, Netflix’s total international membership stood at 68.3 million, representing nearly 55.0% of the total membership for Netflix. In the last five quarters, the average subscriber additions for the company totaled 4.8 million.
Factors influencing Netflix’s strong outlook
Growth in the domestic market is slowing down for Netflix, primarily due to the huge availability of video streaming services from Amazon (AMZN) Prime video, Hulu, and HBO (TWX). Moreover, Disney (DIS) is also setting up its direct-to-consumer model to reach out to consumers through its apps.
To overcome these headwinds, Netflix is focusing on international expansion through the development of local content for every market. The company is aiming to expand in highly populated Asian countries like India and South Korea by releasing shows like Sacred Games and Kingdom, respectively.
Netflix has launched original shows like Marseille in France and 3% in Brazil. The German TV series Dark and Spain’s Heist have become hugely popular among global audiences.
So, Netflix is investing heavily in every country where it operates to bring original shows for its subscribers. This trend could allow the company to outperform its outlook going forward.