- Associated Press - Tuesday, July 24, 2012

LOS GATOS, CALIF. (AP) - Netflix will update its customer count and growth strategy Tuesday afternoon when the video subscription services releases its second-quarter results.

Investor reaction to the numbers will likely hinge on whether Netflix was able to add more subscribers during the spring than management had predicted.

Analysts also will be focusing on how well the company seems to be recovering from a rare loss during the first three months of year as Netflix anted up for the rights to show more movies and TV shows over high-speed Internet connections and paid for expansions of its online streaming service in Latin America and the United Kingdom.

The numbers are due out after the market closes.


Netflix Inc. had predicted that its $8-per-month streaming service would gain 200,000 to 800,000 U.S. customers during the three months ending in June. Many investors, though, suspect that Netflix may have exceeded its goal in the U.S. based on a recent revelation about usage of the service.

Earlier this month, Netflix CEO Reed Hastings revealed that the company’s customers collectively watched more than 1 billion hours of online video in June. Although Hastings didn’t provide any further detail, the statistic implied the viewership of Netflix’s Internet video library has increased significantly since the company last provided any viewership numbers six months ago.

Investors are guessing that some of the recent gains flowed from a significant jump in Netflix’s subscribers to the company’s video streaming service. Netflix ended March with about 26.5 million streaming subscribers, including 3.1 million outside the U.S.

Netflix shares have surged by 18 percent since Hastings shared the news about the increasing usage of the company’s streaming service. The stock gained $1.41, or 1.8 percent, to $81.35 in morning trading Tuesday.

It’s still more than 70 percent below its peak price of nearly $305 reached more than a year ago. The shares plummeted after Netflix raised its prices by as much as 60 percent, triggering a customer backlash that alarmed investors.

Netflix will also provide an update on its steadily shrinking DVD-by-mail rental service. Management entered the quarter expecting to lose as many as 1.1 million DVD customers, leaving that part of the service with about 9 million subscribers.

Analysts polled by FactSet are expecting Netflix to earn 4 cents per share on revenue of nearly $890 million.