Netflix (NASDAQ: NFLX) released its second quarter financials yesterday, reporting total revenue of $2.79 billion, representing year-over-year growth of 32.3 percent. This includes Netflix DVD sales. Total streaming revenue was $2.67 billion, representing year-over-year growth of 35.8 percent. From a membership perspective, Netflix membership grew from 99 million members to 104 million with international members now accounting for 50.1 percent of total membership.

Other highlights for the second quarter include:

• Operating income was $128 million, compared to $120 million forecast.
• Operating margin was 7.1 percent, with a 2017 full-year target of 7 percent.
• Netflix added 5.20 million new members, net, for the quarter.
• U.S. streaming revenue was $1.51 billion.
• International streaming revenue was $1.17 billion.
• Earnings per share for Q2 was $0.15.

While revenue and operating income guidance was on target, Netflix added more members than expected. The company had forecast 3.2 million new members, net, and it got 5.2 million instead. For the first six months of the year, its net additions are up 21 percent year-over-year to 10.2 million.

Domestic net additions of 1.1 million members were the highest second quarter since 2011. Netflix is only forecasting 0.75 million new U.S. members in the third quarter, due to the “un-grandfathering” that took place in the third quarter of 2016. The company estimates 3.65 international net additions for the third quarter.

In terms of content, 27 Netflix original programs received 91 Emmy nominations, with five of the 14 total nominated as best series contenders – Stranger Things, The Crown, House of Cards, Master of None and Unbreakable Kimmy Schmidt. Netflix had more series nominated than any other network. They premiered 14 new seasons of global Netflix original series, 13 original comedy specials, six original documentaries, two original documentary series, nine original feature films and seven seasons of original series for kids.

“We strive to be bold in our programming choices and financially disciplined, so we can keep being bold. Every show has passionate fans and committed talent striving for excellence,” Netflix said.

Part of Netflix’s content strategy is to release feature films. This year Netflix will release 40 features including Okja, War Machine, Bright and I Don’t Feel at Home in This World Anymore. Netflix will also offer non-English language originals to appeal to international viewers like Las Chicas del Cable which attracted audiences in Spain as well as the U.S.

In its Q2 shareholder letter, Netflix addressed the growing competition in the streaming video on-demand world:

“The competition for entertainment time is always intense, but the silver lining is that the market is vast and diverse. YouTube is earning over a billion hours a day of consumers’ time with one type of entertainment, while we are earning over a billion hours a week with our type of entertainment. Linear TV is still huge, piracy still substantial, and there are thousands of firms and approaches around the world earning some fraction of consumers’ entertainment time. The entertainment market is so broad that we’ve grown from zero to over 50 million streaming households in the U.S. over the last 10 years, and yet HBO continues to increase its U.S. subscriptions. It seems our growth just expands the market. The largely exclusive nature of each service’s content means that we are not direct substitutes for each other, but rather complements,” said Netflix.

“We are all co-pioneers of internet TV and, together, we are replacing linear TV. The shift from linear TV to on-demand viewing is so big and there is so much leisure time, many internet TV services will be successful,” added Netflix. “The internet may not have been great for the music business due to piracy, but, wow, it is incredible for growing the video entertainment business around the world.”

“It’s been 20 years since Netflix was founded, and we still thrive on connecting people with great stories. Someday, we hope to entertain everyone.”

Investors reacted favorably to Netflix’s quarterly financials, pushing stock up slightly to $161.70 per share, as of 7:59 PM EDT, July 17. The price per share at 3:30 PM on Friday, July 14 was $160.96. This is a significant uptick from price per share this time last year when it was valued at $98.81 per share on July 18, 2016.

Insider Take:

Netflix’s membership numbers are particularly impressive this quarter, not only because they exceeded their forecast while new players have entered the marketplace. In April, YouTube TV launched in five major cities – New York, Los Angeles, San Francisco, Chicago and Philadelphia. In addition to YouTube Originals, subscribers can access more than 50 networks including ABC, NBC, CBS, Fox, ESPN, FX, USA, Disney and Bravo. YouTube TV also comes with unlimited cloud DVR capabilities.

Hulu Live, Hulu’s version of YouTube Live, launched in May. It has a similar package of channels and pricing to YouTube Live. There are also niche services like Kevin Hart’s Laugh Out Loud SVOD service that have launched or are launching, but they don’t seem to compete significantly with Netflix.

Bottom line: Netflix has developed a winning formula, and despite the competition which it respects and appreciates, it continues to grow and expand while retaining its loyal members. They are the gold standard for SVOD.

For more on the streaming video on demand industry and the latest players, see our June 15 trend report: The Subscription Video-on-Demand Revolution Continues: Perils and Possibilities on the Battlefield.