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Illustration: Rebecca Zisser/Axios

Netflix stock beat Wall Street expectations for user growth and revenue in the first quarter of 2018, adding 7.41 million new subscribers to bring its total worldwide to 125 million.

The big picture: A strong Q4 had analysts and investors worried that the streaming giant wouldn't be able to recreate its blockbuster success. But Netflix plans to drop a whopping $7.5 billion to $8 billion on content for 2018, with executives forecasting that free cash flow will be roughly negative $3 - $4 billion in 2018. They expect this trend to continue for several years as they pour cash into original content.

"It just continues to demonstrate that legacy media ecosystem is collapsing faster than people realize."
BTIG Media Analyst Rich Greenfield

Why it matters: The blockbuster earnings are especially important given the chaos surrounding user privacy and saturation within the digital ad market that's dominated largely by Google and Facebook.

Netflix CEO Reed Hastings told investors that his company spends more like a media company than a tech company: “We’ll spend over $10 billion on content and marketing and $1.3 billion on tech.”

"I'm very glad that we built the business not to be ad-supported but to be subscription... Just objectively, we're much more of a media company in that way than pure tech. Now of course, we want to be great at both, but again, we're really pretty different from the pure tech companies."
— Netflix chief Reed Hastings

The company remained tight-lipped about its M&A strategy, but noted that they are always "on the lookout for new IP."

Expand chart
Data: Netflix, Consumer Intelligence Research Partners, Hulu, Bloomberg; Chart: Axios Visuals

Between the lines: One reason for Netflix's growth could be that competition in the SVOD (streaming video on-demand) space, at this point, is still far off.

  • Amazon Studios is in the middle of a reorganization. The company doesn't share SVOD growth numbers but estimates have their numbers at 90 million subscribers.
  • Hulu is in the U.S. only.
  • Apple is expected to debut its slate of original programming in 2019.
  • Disney launches its entertainment on-demand service in 2019.

"Netflix escaped velocity over last year and no one seems to want to compete," says Greenfield. "What are we waiting for? What is Iger waiting for?"

If there's one group that's benefiting from Netflix's success, it's the cable and satellite companies.

  • Comcast and Sky PLC both recently struck a distribution partnership with Netflix. Comcast will begin bundling Netflix with plans for cable TV, phone and internet beginning this month. Sky will offer subscribers Netflix with its new HD platform in the UK and Ireland.
  • Cox's Susan Fenwick explained during the DOJ/AT&T trial two weeks that the cable provider sees Netflix as a strategic partner, that helps the company retain and lure new subscribers.

"These type of bundled deals really help you bring down churn," says Greenfield. "To extend a bundle in Comcast's platform where you forget you're even paying for Netflix is very complicated. Who wants to call up Comcast and deal with them to cancel."

Go deeper

FDA limits use of Regeneron and Lilly COVID antibody treatments

A coldbox containing monoclonal antibody treatments at a Regeneron clinic in Pembroke Pines, Florida, in August. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

The FDA said Monday it's limiting the use of two monoclonal antibody therapies as COVID-19 treatments because data indicates they're "highly unlikely" to be effective against the dominant Omicron variant.

Driving the news: The FDA revised the authorizations for Regeneron and Eli Lilly "to limit their use to only when the patient is likely to have been infected with or exposed to a variant that is susceptible to these treatments," per a statement from the agency.

Updated 3 hours ago - World

Pentagon: 8,500 troops on high alert for possible deployment to eastern Europe

Photo: Anna Moneymaker/Getty Images

Defense Secretary Lloyd Austin has placed 8,500 U.S. troops on "heightened preparedness to deploy" to eastern Europe in case NATO activates its rapid-response force over tensions with Russia, the Pentagon announced Monday.

Why it matters: No decisions have been made to actually deploy U.S. forces, but the heightened alert level will allow the military to rapidly shore up NATO's eastern flank in the event that Russia invades Ukraine. The Pentagon warned that Russia has shown "no signs of de-escalating," and continues to amass troops on Ukraine's borders.

Updated 3 hours ago - Politics & Policy

Biden calls Fox News reporter a "stupid son of a b---h" on hot mic

President Biden blasted Fox News' Peter Doocy on Monday after the reporter asked if the nation's soaring inflation is a political liability, saying, "what a stupid son of a b----h."

The latest: The president called Doocy Monday evening, the reporter told Fox's Sean Hannity. "He cleared the air and I appreciated it. We had a nice call," Doocy said when asked whether the president apologized, adding: "I don't need anyone to apologize to me."