Tech

Why Netflix's huge subscriber beat is even more impressive than normal

Key Points
  • Netflix added 5.2 million subscribers in Q2, and now is at 104 million subscribers.
  • The company added 1.07 million domestic and 4.14 million international subscribers.
Cable loses subscribers to Netflix as consumers opt for 'a la carte': Gerber Kawasaki's Ross Gerber
VIDEO4:5504:55
Cable loses subscribers to Netflix as consumers opt for 'a la carte': Gerber Kawasaki's Ross Gerber

Netflix overwhelmingly beat its projections for new subscribers this quarter, an impressive feat considering that Q2 has traditionally been its slowest quarter for adding subscriptions.

The company welcomed 5.2 million subscribers this past quarter, putting it at 104 million subscribers worldwide. The announcement on Tuesday widely exceeded the company's estimate of 3.2 million.

Q2 has historically been Netflix's slowest quarter for new subscribers. During the same period last year, for example, the stock dipped 15 percent in after-hours trading after the company only added 1.7 million subscribers, compared to projections of 2.5 million.

"Netflix has become a juggernaut in the entertainment industry," Gerber Kawasaki CEO Ross Gerber told CNBC's "Closing Bell."

"A drive down Sunset Blvd. shows it all, billboard after billboard of Netflix Hit shows. The entire cable industry is starting to be decimated by Netflix. Millennials don't buy cable anymore because there is actually all the content you need on Netflix and HBO. Now this phenomenon has gone global."

Netflix Co-founder Mitch Lowe reacts to the company's second quarter results
VIDEO5:4805:48
Netflix Co-founder Mitch Lowe reacts to the company's second quarter results

Netflix's trajectory suggests it could hit 200 million subscribers one day, Gerber added.

The company may not be as close to the saturation point of U.S. subscribers as some analysts may have thought. Netflix added 1.07 million domestic subscribers this quarter, compared with the 613,000 estimate. However, its biggest area of growth was among international subscribers. Netflix added 4.14 million subscribers overseas, ahead of the 2.59 million estimate.

In light of its recent growth, the company is projecting it will add 4.4 million subscribers in Q3.

Still, Surevest Wealth Management CEO and CIO Robert Luna is cautious about Netflix's growth. Though people bullish on the stock have high hopes for Netflix expansion in India, Luna said Netflix will face challenges because of the cost of content and lack of alternative revenue sources. The service costs $7.50 in India, but with a low annual income of just $1,500 the price is too high, Luna pointed out.

"Netflix is spending wildly to maintain its market share, yet new household penetration in the U.S. seems to be peaking, and I believe that the holy grail of international expansion bulls hang their hopes on will ultimately disappoint," he told "Closing Bell."

— Additional reporting by Crystal Lau.

WATCH: Netflix share jump after earnings beat

Netflix shares jump after earnings beat on top line
VIDEO2:1002:10
Netflix shares jump after earnings beat on top line