Netflix Surges 11%: Sub Adds Crush Estimates; Discloses ‘Content Accounting’

[Updates with stock price increase at bottom of story.] 

Streaming video pioneers Netflix (NFLX) this afternoon reportedQ2 revenue that easily topped analysts’ expectations, and missed by a penny on the bottom line, and crushed expectations for how many subscribers it would add, and profit and forecast this quarter higher as well, driving its shares sharply higher in late trading.

Netflix’s is the first of the big techs to report this earnings season.

In an interesting move, the company decided this quarter to open the kimono, so to speak on its spending on content, posting a separate document on its investor relations home page, called “overview of content accounting.”

The slide presentations provides a number of annotated ledger statements, including the one for the balance sheet, shown at the top of this post.

As Netflix describes it, “In continued success, we will deploy increased capital in content, particularly in owned originals, and, as we have said before, we expect to be FCF negative for many years. Since our FCF is driven by our content investment, particularly in self-produced originals, we wanted to provide some additional context on our content accounting at our investor relations website.”

Revenue in the three months ended in June rose to $2.78 billion, yielding EPS of 15 cents.

Analysts had been modeling $2.76 billion in revenue and 16 cents EPS.

The company added 4.14 million subscribers internationally, and 1.07 million in the U.S., well above expectations by analysts of 631,000 domestic streaming additions and 2.59 million international subs.

As I wrote earlier, some bulls had some subscriber numbers meaningfully higher than consensus, but the results made even those bullish expectations look tame.

For the current quarter, the company projected revenue of $2.969 billion, and EPS of 32 cents, with domestic subscriber additions of 750,000, and international subscriber additions of 3.65 million. That compares to…

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