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managed to report another blockbuster quarter.

During the third quarter, the company earned $38 million, or 70 cents a share, compared with $30.1 million, or 52 cents, in the year-ago period for Netflix.

Excluding the cost of stock options, Netflix earnings were 78 cents a share, significantly higher than analysts' forecast of 71 cents.

Netflix revenue reached $553.2 million, also beating expectations of $551 million.

Netflix gained 1.9 million new subscribers, more than the 1.7 million expected -- marking the fourth consecutive quarter of more than 1 million new subscribers.

The company now expects to have between 19 million and 19.7 million subscribers by the end of the year, compared with prior guidance of 17.7 million to 18.5 million.

In its streaming business, the percentage of subscribers who streamed more than 15 minutes of a movie or TV episode was 66%, up from 41% in the third quarter of 2009 and 61% in the second quarter of this year.

Shares of Netflix are surging 6.8% to $163.49 in after-hours trading.

Netflix's subscription business is, no doubt, seeing a boost, due to the availability of more platforms like


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Wii, as well as its expanding content library. Over the past several months Netflix has reached new streaming agreements with Relativity Media, Warner, EPIX, Nu Image/Millennium Films, Universal and Sony.

Netflix also started a streaming service in Canada in September, its first foray outside of the U.S., while the closure of brick-and-mortar stores should also present an opportunity for market share gain.

But the biggest question is, can Netflix keep up its rapid growth pace?

Susquehanna Financial analyst Marianne Wolk downgraded Netflix to sell at the beginning of the month, saying the risk/reward of the company is off balance. Netflix is currently trading at $153.90%, up 48.5% since reporting second-quarter earnings, and 27.5% ahead of Wolk's valuation of $120, which she raised over the summer.

"Once the installed console base is saturate, we expect to see new subscriber additions only from new console purchases, slowing the rate of growth by mid-2011," Pachter wrote. "We believe Netflix will be challenged to grow at its current pace for more than another year, and we expect its premium valuation to contract."

--Written by Jeanine Poggi in New York.

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