Yesterday Netflix (NASDAQ: NFLX) announced its first quarter 2017 financials with $2.52 billion in revenue, compared to $1.81 billion in revenue for the first quarter of 2016. In addition, the streaming video giant added 4.95 million net new members, bringing total memberships to 98.75 million. Other quarterly highlights include:

• Total revenue was $2.64 billion, compared to $1.96 billion, year-over-year (streaming represents $2.52 billion of the total; DVD rentals make up the difference)
• Operating income of $257 million, compared to $49 million, year-over-year
• Operating margin of 9.7 percent
• Net income of $178 million, compared to $28 million, year-over-year
• Diluted earnings per share of $0.40, compared to $0.06 per share, year-over-year

“The opportunity provided to us by the growth of the global internet is gigantic, and our plan is to keep investing as we increase membership, revenue and operating margins,” said Netflix in a letter to shareholders.

Operational highlights for the first quarter include:

• International net additions decreased by 22 percent year-over-year.
• International revenue grew 62 percent year-over-year.
• The company has been growing rapidly in Latin America, Europe and North America, and is working on improving local content for audiences in Asia, the Middle East and Africa.

The company is forecasting the following for the second quarter of 2017:

• Total revenue, including streaming and DVD revenue, of $2.76 billion
• Operating income of $120 million
• Operating margin of 4.4 percent
• Net income of $66 million
• Net new member additions of 3.2 million
• Diluted earnings per share of $0.15

In the shareholder’s letter, Netflix explained that the operating margin was higher in the first quarter than forecast because House of Cards’ season 5 was moved from the first quarter to the second quarter. This shift is also responsible for the expected increase in new member additions of 3.2 million compared to 1.68 million for the second quarter of 2016.

New releases in the first quarter include A Series of Unfortunate Events, Santa Clarita Diet, Ultimate Beastmaster, Marvel’s Iron Fist, Ingobernable, 13 Reasons Why, Dave Chappelle: Colleection 1, Gad Gone Wild and Sandy Wexler, a Netflix original starring Adam Sandler.

In 2017, Netflix said it will spend more than $1 billion marketing its content to drive customer acquisition which will include programmatic advertising, earned media coverage and participating in Comcast’s April Watchathon.

As far as competition goes, Netflix tells shareholders they do not expect streaming + live services like Sling TV, PlayStation Vue, DirecTV Now, YouTube TV and Hulu’s new service to be direct competitors.

“We believe VMVPDs will likely be more competitive to existing MVPD services since they offer a subset of the same channels at $30-$60 per month, and may appeal to a segment of the population that doesn’t subscribe to a pay TV bundle,” Netflix said. “But we don’t think it will have much of an impact on us as Netflix is largely complementary to pay TV packages. Our focus also is on on-demand, commercial-free viewing rather than live, ad-supported programming.”

Investors reacted favorably to Netflix’s earnings report. Netflix stock opened at $144.46 per share, and was at $147.25 per share at 5:21 PM EDT. Compare this to Netflix stock which was at $108.40 a year ago on April 18, 2016.

Insider Take:

The 10-year-old Netflix had another stellar quarter, pleasing members and stockholders alike, evidenced by stock prices and its growing membership. While Netflix’s membership growth has slowed somewhat, it looks like it will exceed 100 million members at some point this year, an impressive fete for any streaming video on-demand service.

We agree with Netflix’s assessment that new players like YouTube TV and Hulu’s pending live + on-demand streaming service will have little impact on Netflix. While they have some overlapping content, Netflix has a lot of original programming, and it is all ad-free. Netflix also has 10 years of branding and customer loyalty behind it.They seemed to have developed a formula for success that keeps getting better with time.