Internet Software/Services · #19 in the Retail 100

Netflix

NFLX

Our rating: hold
12-month target: $78.75 +24.2%
Expected vs. S&P 500: +5.7 ptsSee the math
Next earnings: Jan 19In 75 daysEarnings calls page ↗

Netflix keeps raising prices and adding members even though viewing barely grows, and ads, meant to be its next engine, are behind plan.

Summary

Netflix is the most profitable streaming service, keeping about a third of its revenue as operating profit. It grows by charging each member more, not by getting people to watch more. That approach is showing strain: viewing has barely moved for two years, growth has slowed every quarter of 2026, and ads, its one new source of revenue, are behind plan. The stock needs price increases to keep landing until ads catch up.

$63.42

-$60.44 (-48.80%)Past year

What Netflix does

Netflix earns a monthly fee from more than 325 million paid memberships worldwide. Its shows and films cost the same however many people watch, so more members and higher prices mostly add to profit.^1,38,39

What it sells

MembershipsAbout 97% of revenue, 2025
Monthly plans priced country by country. Revenue grows by adding members and by raising prices.
AdvertisingAbout 3% of revenue, 2025
Ads shown to members on the cheaper ad-supported plan. Ad revenue rose more than 2.5 times in 2025, to over $1.5 billion.
Live events
Live programming is just over 5% of 2026 content spending, yet drove six of the top 10 days for new sign-ups.

Who buys it

Households around the world. The U.S. and Canada were 44% of 2025 revenue, Europe, the Middle East and Africa 32%, and Latin America and Asia-Pacific about 12% each. Advertisers buy ads shown on the cheaper plan.

Where you've seen it

The "Top 10" row on the Netflix home screen, ranked separately in more than 90 countries.

The backstory

Netflix won streaming, but people are barely watching more of it, and YouTube is taking a growing share of TV time. That leaves one way to grow: earn more from each member. Netflix is doing it with regular price increases, a cheaper plan with ads, and a content budget that grows slower than revenue.

How the business makes money

Why each Netflix price increase is mostly profit^{1,3,4,5,16,17,20,25,26,28}

Step 1
Members watch a lot, which Netflix argues is what lets price increases stick. It has more than 325 million paid memberships.
Step 2
Price does most of the work while viewing barely grows. The cheapest U.S. plan, with ads, rose to $8.99 a month in March.
Step 3
Shows cost the same however many people watch. Netflix spends about $20B a year on content, and that cost grows slower than revenue.
Step 4
So more of each dollar stays as profit. Netflix expects to keep 31.5¢ of each $1 of 2026 sales after running costs.
What shareholders get
Spare cash, about $12.0B this year, mostly buys back stock, so each remaining share owns more of the profit.

Advantages

Far higher profit margins than rivals

Major advantage

Netflix's biggest advantage. It keeps about a third of revenue as operating profit, more than double Disney+ and Hulu, the largest rival that reports streaming profit separately.^1,13

Room to raise prices at home

Strong advantage

Members keep paying more. U.S. and Canada revenue still grew 10% in Q2 after every U.S. plan rose $1 to $2 in March.^1,5

Growth outside North America

Strong advantage

Its fastest growth is abroad. Most revenue now comes from outside the U.S. and Canada, and Latin America grew 21% in Q2.¹

What's changing

Growth is slowing, so Netflix cuts costs and returns cash

Netflix is shifting from chasing growth to running lean. It walked away from the Warner Bros. bidding in February and collected a $2.8B breakup fee. In October it cut about 1,000 jobs and replaced its content chief with Peter Rice, a former Disney television head. Co-CEO Ted Sarandos said on September 30 that Netflix is not growing as fast as he wants.^{1,6,7,11,12,18,27,28,32,33}

Competitors

Who else an investor would consider, and how they compare.

Company	Market value	What it does	Compared with Netflix
Netflixthis stock	$260.22B	Netflix earns a monthly fee from more than 325 million paid memberships worldwide. Its shows and films cost the same however many people watch, so more members and higher prices mostly add to profit.
YouTube (Alphabet)GOOGL	$3.88T	Free videos from millions of creators, paid for by ads.	YouTube has nearly twice Netflix's TV time, using creators' videos instead of paid shows.^4,16,17
Disney (Disney+, Hulu, ESPN)DIS	$190.64B	Disney+, Hulu and ESPN, sold as a bundle built on famous franchises and sports.	Disney streams its franchises and sports; Netflix runs streaming far more profitably.¹³
Paramount Skydance (with Warner Bros. Discovery)PSKY	—	Paramount+ owner buying Warner Bros. Discovery to combine HBO Max with Paramount+.	It outbid Netflix for Warner Bros., building a rival with about 200M subscribers.^6,11,12
Amazon Prime VideoAMZN	$2.69T	Streaming included with Prime shipping, showing ads unless you pay extra.	Amazon funds video from Prime; Netflix must make streaming pay on its own.

Leadership

Who runs the company, and how the stock has done under the CEO.

NFLX +20.7%S&P 500 +160.8%Total return with dividends since Jul 2020

202120222023202420252026

Ted SarandosCo-CEO6.2 yrs

Greg PetersCo-CEO3.7 yrs

Spencer NeumannCFO7.8 yrs, since 2019

When Sarandos was named (Jul 2020), the stock moved -6.5% that day; the S&P 500 moved +0.3%.

Wall Street on Sarandos: MixedHSBC cut the stock to Hold, saying viewing time is unlikely to recover soon. Deutsche Bank upgraded it to Buy, saying worldwide viewing is stronger than investors think.^L6,L7

Leadership sources (7) · researched Oct 2026

L1Netflix Inc. Form 8-K (appointment of Ted Sarandos as co-Chief Executive Officer) · Netflix / SEC, 2020-07-16
L2Netflix Q2 earnings: Stock plummets as Ted Sarandos is named co-CEO · Fortune, 2020-07-16
L3Netflix Inc. Form 8-K (appointment of Greg Peters as co-Chief Executive Officer) · Netflix / SEC, 2023-01-19
L4Netflix leadership changes: Reed Hastings steps up as executive chairman, Greg Peters named co-CEO · Mediaweek, 2023-01-23
L5Spencer Neumann Named Netflix Chief Financial Officer · Netflix, 2019-01-02
L6Netflix Stock Downgraded Over 'Worrying' Engagement and YouTube Competition by HSBC, Wells Fargo · TheWrap, 2026-09-23
L7Deutsche Bank Turns Bullish on Netflix, Says Global Engagement Is Underappreciated · 24/7 Wall St., 2026-09-29

Bull vs. bear: two bets on the same stock

1
A share is a small slice of the company. Its value comes from the profits the company will make in the future.
2
Nobody knows those profits yet. Buyers (bulls) pay today's price betting they'll beat what most people expect. Sellers (bears) bet they'll fall short.
3
When results come in, the price moves toward whichever side was right, and that side makes money.

The question they disagree on

Can price increases and ads keep Netflix's revenue growing 12% or more in 2027, while viewing hours grow only about 2% a year?^{1,3,4,8,14,16,17,25,26,28,29,30,32,33}

Bull case: why buyers buy

Members keep accepting higher prices and ad sales double, so revenue keeps growing by double digits and the extra cash funds large buybacks.

Price increases are still landing. Revenue rose 12% last quarter, and Netflix says fewer members cancelled, both in the U.S. and worldwide.
Profit is rising faster than revenue. Operating margin reached 34.6% last quarter, up from 28.2% a year earlier.
Ads have room to grow. Netflix adds its ad plan in 15 more countries in 2027.
The cash goes back to shareholders. Netflix bought back a record $4.8B of stock last quarter.

Bear case: why sellers sell

If viewing stays flat while YouTube keeps gaining and ad products keep slipping, Netflix runs out of room to raise prices and revenue growth slips into single digits.

People aren't watching more. Viewing hours rose just 2% in the first half of 2026, so growth has to come from price.
Ads, the new growth source, are behind plan. Netflix cut its 2026 ad forecast, blaming delays in its own ad products.
Growth slows every quarter. Revenue growth fell from 16% in Q1 to 12% in Q3, and the Q4 forecast came in below analysts'.
YouTube is taking TV time. It now has 14.2% of U.S. TV viewing, against 7.8% for Netflix.

Where Delphi landsholdWe think today's price already weighs both sides fairly.See why

What to watch

The numbers that will settle the debate.

Revenue growth▼ worsening

12% last quarter, down from 16% in Q1. Netflix expects about 12% again in Q4.^1,28

Shows whether prices and ads can carry growth while viewing stays nearly flat.

Viewing hours■ flat

Up 2% in the first half of 2026, after 1.5% in 2025. Netflix gave no global update in Q3.^1,3,19,28,29

Shows whether members value the service more over time. Netflix will report it only once a year from 2027.

Ad revenue■ unclear

About $2.7B expected for 2026, cut from about $3B, and still roughly double 2025^1,2,28,30

The largest new source of revenue that does not depend on raising subscription prices.

Next earnings report

Jan 19

In 75 days

Earnings calls page ↗

Expected earnings per share: $0.68
Expected revenue: $13.44B

What to listen for: Whether the delayed ad products ramp up, whether Q4 revenue reaches Netflix's $13.44B forecast, and what Netflix guides for 2027 revenue and margin.^28,30,35

What would prove this wrong

✕Q4 revenue misses the $13.44B forecast, or growth falls toward single digits.
✕Netflix's share of U.S. TV time keeps falling while YouTube's rises.
✕Ad revenue misses the roughly $2.7B 2026 target, or ad products slip again.
✕U.S. and Canada revenue growth, 11% in Q3, slows further after the March price increases.
✕Combined Paramount-Warner Bros. outbids Netflix for major films, series or sports rights.

Our ratingHoldas of Nov 3 close, $63.42 · what ratings mean

Earnings should grow about 16% next year and the stock trades below its five-year valuation, but the ad cut and slowing revenue leave too small an edge.

12-month target: $78.75 (+24.2%)
S&P 500, same method, with dividends: +18.5%
Expected vs the market: +5.7 points

The math behind the recommendation

Three 12-month price scenarios, weighted by probability, compared with the S&P 500 under the same method.

Now $63.42

Target $78.75

bull case15% likely

$97.80 +54%

Members accept higher prices and the delayed ad products arrive, so ad sales and revenue growth hold near 12% in 2027 while buybacks keep shrinking the share count.

$4.54 earnings per share × 21.6 = $97.80

base case50% likely

$84.70 +34%

Price increases and ads offset nearly flat viewing, and revenue grows about 10 to 11% a year, in line with analyst forecasts.

$4.32 earnings per share × 19.6 = $84.70

bear case35% likely

$62.09 -2%

Viewing stays flat, ad products keep slipping and YouTube keeps gaining TV time, pushing revenue growth into single digits in 2027.

$4.29 earnings per share × 14.5 = $62.09

Why these odds: Next-year estimates slipped, with one analyst raising and seven cutting in the past 30 days. Netflix cut its 2026 ad forecast and guided Q4 revenue below estimates, its third weak forecast in a row. Retention beat expectations.

How the prices are built: Wall Street expects earnings per share of $4.32 for the year starting a year from now (analysts range from $4.25 to $4.75). Today the stock trades at 17 times next year's earnings per share; its five-year middle is 32.98.^{1,14,22,28,29,30,34,35,36,37}

What tests the call: Q4 2026 earnings and 2027 guidance: whether ad products ramp and revenue growth holds near 12% (Jan 19)

Buy means expected to beat the S&P 500 by 10+ points over 12 months; Sell means expected to trail it by 10+. Inputs gathered Oct 21; the recommendation updates with the price every day. Model-generated, not personalized investment advice. How ratings work · Track record

What the price assumes

At $63.42, investors pay less for each dollar of Netflix's earnings than for the average stock's

Netflix trades at 17 times the earnings analysts expect over the next 12 months. That ratio is the multiple: what investors pay today for each dollar of a year's earnings. That is cheaper than it has been 80% of the time over the past five years, when the middle was 33.

Analysts expect earnings to grow about 16% the year after, against about 16% for the S&P 500. The S&P 500 trades at 19 times. At the market's multiple, today's price would only make sense if Netflix earned about 9% less than forecast over the next year.

Netflix multiple: 17×
S&P 500 multiple: 19×
Base case: +34%
Bear case: −2%

The skewOur bear case loses about 6¢ for every $1 our base case makes. That ratio, how much you stand to lose against how much you stand to make, is the skew.

Last earnings

No reported quarters available.