Netflix (NFLX) announced their Q1 numbers yesterday, and there was a lot to like:

• They crushed EPS (earnings per share ) with 76 cents vs. 57 cents expected.
• Beat on revenue of $4.52 billion vs. $4.50 billion expected.
• Paid subscriber additions also beat expectations by a fair amount. Domestic additions were 1.74 million vs. an expected 1.61 million.
  International growth was 7.86 million vs. 7.31 million.
• Revenue increased 22% year over year and earnings per share increased 18% year-over-year.

Those are some pretty great numbers all around. It’s especially nice to see them continue to beat expectations on subscriber growth despite a price increase in the United States. Similarly, the revenue increase was impressive considering the strong dollar has been pressuring their international revenue (reported in dollars). Nearly 60% of Netflix’s paid subscribers are international now, and as you can see above, that’s also where most of their growth is coming from. As time goes on, the strength of the dollar will play a bigger and bigger role in Netflix’s revenue.

On the same day that Disney (DIS) stock popped after announcing details of their upcoming streaming service, Netflix stock dropped a fair bit. Clearly there was some concern by people about upcoming competition in the video streaming arena by not just Disney, but also other behemoths like Apple (APPL). Netflix CEO Reed Hastings has been pretty consistent about saying that they aren’t concerned with competition in the video streaming market and he maintained that stance this quarter. While only time will tell, I think he’s right. The shift from bundled cable packages to video streaming is still in the early innings and there is room for multiple winners. It’s worth noting that the top end of Disney’s projections for subscribers is 90 million in 5 years. Netflix has 50% more than that right now and is still growing at a pretty rapid pace. Obviously, Disney is such a powerful content producer that they continue to bear watching (and I’m clearly a big believer in the company), but there’s little evidence right now that their entry will hugely negatively impact Netflix.

There is one area where Disney is competing pretty directly with Netflix and crushing them (so far), though: India. Disney acquired Hotstar as part of their deal to acquire a number of Fox assets. By most metrics, Hotstar has a huge advantage over Netflix in India right now. While the tone on Netflix’s earnings call was optimistic when India was brought up, it’s telling that they have had to experiment with cheaper, mobile-only plans. There are many reasons to believe that India is the most important international market for Netflix going forward, so their progress here bears some close watching.

The one fly in the ointment for this quarter’s earnings was their guidance for next quarter, although it was amusing to see some of the after-hours price gyrations as people wildly overreacted (in my opinion) to different aspects of the report:

It sounds like the big disappointment was that Netflix guided for an increase of 5 million paid subscriptions next quarter versus the 5.5 million that analysts were expecting. I’m not terribly concerned. Netflix has a history of conservative estimates that they end up beating. Even if they “only” add 5 million subscribers, that’s still pretty impressive. Think of it this way: (5 million subscribers a quarter) x (4 quarters a year) x (5 years) = 100 million subscribers. That “bad guidance” puts them on a pace to beat the 90 million upper-end estimate that played a role in boosting Disney’s stock just recently.

Obviously it’s not a perfect comparison. Netflix has the valuation of a high growth company and Disney doesn’t. Disney also figures to see accelerating growth with their streaming service while Netflix is likely to see the opposite. Still, I think it’s a useful comparison because it shows that Netflix is still growing rapidly and has a long runway ahead of it.

Especially if they can be competitive in the Indian market.