Netflix ( NFLX) reported a 61% drop in fourth-quarter earnings Wednesday, due in part to a tax gain it recorded in 2005, but the results topped Wall Street's expectation.

The online DVD rental service reported net income of $14.9 million, or 21 cents a share, down from the $38.2 million, or 57 cents a share, it recorded for the same quarter a year earlier. The 2005 quarter benefited from a deferred tax benefit of $34.9 million, or 52 cents a share.

Analysts polled by Thomson Financial, on average, expected earnings of 15 cents a share for the last quarter.

Shares of Netflix recently were up $1.75, or 7.7%, to $24.50 in after-hours trading. Those gains came on top of the stock's 4.5% rise during the regular trading session.

On its top line, Netflix reported revenue of $277.2 million, up 44% from $193 million a year earlier and in line with Wall Street's estimate.

The jump was powered by subscriber growth that left Netflix with around 6.31 million subscribers at the end of the quarter, compared with a total of 4.18 million at the end of 2005 and 5.66 million at the end of the third quarter.

The company's closely watched churn rate, which measures the number of subscribers that opt out of the service, declined during the quarter to 3.9%, compared with 4% for the year-ago period and 4.2% for the third quarter of 2006.