New York: Netflix Inc shares soared to a record high after the streaming company added more than five million customers in the third quarter and eclipsed Wall Street’s expectations on every major financial metric.

Sales for the period grew 15% to US$9.83bil, the company said in a shareholder letter, while earnings increased to US$5.40 a share.

Analysts were predicting Netflix would add 4.52 million subscribers.

The shares surged 11% to US$763.89 last Friday in New York, the biggest gain in a year. The stock has more than quadrupled since May 2022, when a slowdown in the company’s growth led to a major sell-off and spooked investors about the entertainment business.

Since then, Netflix has added more than 60 million customers, thanks to a crackdown on password sharing and the introduction of a lower-priced subscription with advertising.

The company finished the quarter with 282.7 million subscribers.

“We’re feeling really good about the business,” co-chief executive officer Ted Sarandos said on a call with analysts.

“We had a plan to re-accelerate growth and we delivered on that plan.”

Most analysts believe the boost from the password crackdown is temporary, and that Netflix will soon need to find another way to grow.

The company has yet to see financial returns from its investment in advertising or video games, and some on Wall Street now worry the stock is overvalued.

Subscriber growth “does seem like it’s slowing back down,” according to Dave Heger, an analyst with Edward Jones.

Yet Netflix continues to deliver stronger growth than expected, and its leadership has sought to reassure investors by saying the company will benefit from the crackdown on password sharing in the years ahead.

The company predicted sales next year will increase between 11% and 13% – to as much as US$44bil – through a mix of new members and price increases. Netflix will increase prices in Spain and Italy on Friday, and said it will phase out one of its cheaper-priced plans in Brazil later this quarter.

Two regions – Europe, the Middle East and Africa, and the Asia-Pacific – accounted for almost all of the company’s new customers.

Netflix lost customers in Latin America for the first time since early 2023.

New subscribers in the current, fourth quarter will exceed the third-quarter total, the company also said.

While Netflix acknowledges its advertising business is progressing slowly, management said that it has grand ambitions for the next couple of years.

The company is building its own advertising technology and has struck several deals to sell its advertising-supported service alongside other streaming services. Advertising sales will double next year, co-chief executive Greg Peters said. 

 - Bloomberg