Netflix shares soar on strong earnings for third quarter

Shares of Netflix Inc. soared in after-hours trading Monday as the video streaming service reported stronger-than-expected earnings and subscriber growth for the third quarter.

The stock was up $19.75, or nearly 20 percent, to $119.67 a share after the market closed.

Netflix saw robust subscriber growth for the quarter, adding 370,000 net memberships in the U.S. and 3.2 million internationally, for a total of 3.57 million, well ahead of the 2.3 million the company forecast. The Silicon Valley company said in July it expected to add 300,000 subscribers in the U.S. and 2 million subscribers internationally in the third quarter.

The service has 86.7 million subscribers worldwide.

Netflix reported third-quarter earnings of 12 cents a share, significantly beating estimates of six cents a share from analysts polled by FactSet Research Systems Inc. Revenue during the quarter climbed to $2.16 billion, up from $1.58 billion from the same period last year.

Investors have been anxious to see the pace at which Netflix has been able to add additional subscribers. They also want to evaluate how much the production costs for Netflix’s original programming, such as “House of Cards,” are weighing on the company’s profitability.

After Netflix reported its second-quarter results in mid-July, its stock tumbled 13 percent the next day to $85.84 a share. The stock has recovered since then, but it’s still down 14 percent for the year so far.

Meanwhile, several California cities are mulling whether to tax subscribers of video streaming services using existing municipal utility tax codes that were designed for taxing cable-television users.