Despite assessing an extra $1 per month for its streaming service, Netflix's second quarter 2014 revenues beat investor expectations, as analysts predicted its third quarter earnings would mirror the previous period.
But on a not-so-good note, Netflix expects lackluster earnings ahead.
Netflix surpassed its projected 49.8 million subscribers, with more than 50 million users registered at the close of the second quarter. Netflix's US subscribers increased to approximately 35 million users, up from 28 million compared to the same quarter a year ago.
While Netflix' revenue growth is encouraging, it's slim earnings are a testament to its efforts to acquire more programming. Yet, in a letter drafted by Netflix CEO Reed Hastings and CFO David Wells, Netflix said its expansion in Europe would help the company turn a profit on the continent.
"This launch into markets with over 60 million broadband households will significantly increase our European presence and raise our current international addressable market to over 180 million broadband households, or 2x the number of current U.S. broadband households," said Netflix. "Our international contribution loss of ($15.3) million has been rapidly approaching contribution profitability as we see improvements across all existing markets. Our broad success from Argentina to Finland has convinced us to further invest aggressively in global expansion."
Netflix earned $71 million in profits during the second quarter, up by $41.5 million in comparison to the same period in 2013. Of the $1.2 billion in revenue Netflix said it expects to earn in the third quarter, $347 million of has been projected to come from outside of the US.
Up from $0.49 shares during the second quarter of 2013, Netflix' earnings stood at $1.15 per share a year later -- investors has expected Netflix' shares to rest a cent higher. Looking ahead to the third quarter, Netflix said its expected it shares to settle around $.089 per share.
During its chat with investors, Netflix also took time to disavow a practice that it said has been plaguing the quality of its service.
"Our focus on strong net neutrality, including interconnection, is about preventing large ISPs from holding our joint customers hostage with poor performance to extract payments from us," Netflix stated.
Netflix and Verizon have been in a drawn out feud, each pointing a finger at the others as Netflix customers complain of poor streaming service. Customers with top-tier Internet connections have complained of sub-HD video and disruptions in streams.