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Netflix rides Squid Game's phenom to global subscriber growth again in Q3

Netflix added more members than analysts estimated it would, especially in Asia, after post-lockdown sluggishness had marred its year up till now.

Angela Lang/CNET

Netflix added 4.28 million subscribers in the most recent quarter, riding an unexpected wave of global interest thanks to its breakout hit Squid Game that helped turned the company's biggest region -- the US and Canada -- back to growth and that recruited another wave of members in Asia. 

Netflix's global reach, allowing creators access to broad audiences, had "no better example ... than Squid Game, a unique Korean story that first captured the zeitgeist in Korea and then globally," the company said in a letter to shareholders. It noted that demand is "high" for consumer products catering to the Squid Game fandom, and "those items are on their way to retail now." It also ratcheted high its official tally of how many people experimented with watching Squid Game, saying 142 million accounts had watched at least two minutes of the show. No other Netflix original has ever crossed the 100 million account threshold before Squid Game. 

(Fun fact: Netflix considers itself a global competitor beyond just TV -- so much so that it made a point of noting that during Facebook's global outage on Oct. 4, Netflix engagement jumped 14% while the social network was down. Netflix didn't specify how it measures engagement, though.)

Netflix, the world's dominant streaming-video subscription service, said subscribers increased by 4.28 million to reach 213.56 million total between July and September, according to its Tuesday report on third-quarter results. That beats Netflix's July guidance to add 3.5 million new members, while analysts on average were estimating 3.9 million new members, according to Refinitiv. 

Netflix's guidance for the fourth quarter exceeded analysts' expectations too, with the company predicting 8.5 million new members versus the 8.3 million consensus analyst estimate. 

Shares were up 0.4% at $641.75 in after-hours trading. Through the close, Netflix stock had risen 18% this year, catching up with the growth of the market at large only in the last few weeks thanks to bullishness around Squid Game

After Netflix enjoyed surges in popularity during pandemic lockdowns last year from people stuck at home and desperate for entertainment, its growth had slowed to a trickle earlier this year. The company even lost members in the US and Canada during the early summer for the first time since 2019. 

Netflix has pointed to a number of factors for its dry spell earlier this year. Although its ambitious pipeline of shows and movies kept the service stocked with new titles through much of 2020, COVID-19's delays to film and TV production finally caught up with Netflix in 2021, leading to a light slate of new programming in the first half. And Netflix had long warned that some of the surges in its membership may have pulled forward demand, essentially reeling in subscribers earlier than would they would have joined otherwise later. 

On Tuesday, Netflix noted that it's looking forward to the programming coming out before the end of this year as "what we expect to be our strongest Q4 content offering yet," with shows like The Witcher, You, Tiger King, Cobra Kai and Money Heist (also known as La Casa de Papel) returning and with big-budget, big-star movies like Red Notice and Don't Look Up arriving, too. 

Netflix has also faced a wave of competition from new rivals like Disney Plus and HBO Max, as media and tech giants have launched their own services to take on Netflix as television transitions to a future of streaming. Netflix's rare subscriber loss in the US and Canada hinted that the new competition, which is centered in the US, may be pressuring Netflix's membership growth there. 

In the US and Canada, its biggest single region, Netflix added a meager 73,000 streaming customers, for a total of 74 million -- barely there growth that nonetheless marks an improvement over the net loss of members in the previous period. In Europe, Middle East and Africa, Netflix added 1.8 million, while in Latin America, it increased membership by 330,000. 

But in the Asia Pacific region, Netflix gained 2.18 million subscribers, meaning half of its total net additions worldwide came from Asia. It's the second consecutive quarter that growth in members was strongest there. 

Looking ahead to the fourth quarter, Netflix also predicted 80 cents per share in earnings. On average, Wall Street analysts who track Netflix expected $1.10.

Overall in the third quarter, Netflix reported a profit of $1.45 billion, or $3.19 a share, compared with $790 million, or $1.74 a share, a year earlier. Revenue rose 16% to $7.48 billion.

Analysts on average expected per-share profit of $2.56 -- one penny higher than Netflix's own guidance -- and $7.679 billion in revenue.

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