ii view: Netflix predicts boost to annual sales
Membership subscriptions, advertising income and the benefit of a weaker dollar thanks to US trade tariffs. Analyst Keith Bowman looks at prospects.
18th July 2025 11:28
by Keith Bowman from interactive investor
Second-quarter results to 30 June
- Revenue up 16% year-over-year to $11.08 billion (£8.2 billion)
- Earnings per share (EPS) up 47% from a year ago to $7.19 per share (£5.35 per share)
Guidance:
- Expects third-quarter revenue to grow 17% to $11.5 billion
- Expects third-quarter earnings to grow 27% year-over-year to $6.87 per share
- Now expects revenue of between $44.8 billion and $45.2 billion in 2025, up from a previous $43.5-44.5 billion
ii round-up:
Netflix Inc (NASDAQ:NFLX) has increased forecasts for annual revenue given a combination of a weaker US dollar, ongoing membership growth and increased ad-sales.
The global streaming giant now expects full year 2025 revenues of between $44.8 billion and $45.2 billion, up from a previous estimate of $43.5-44.5 billion. Second-quarter revenue to late June rose 16% from a year ago to $11.08 billion, driving earnings up 47% to $7.19 per share. Analysts had forecast $11.08 billion and $7.08 per share respectively.
Costs related to more new shows during the second half however are expected to result in a full-year profit margin of around 30%, potentially down from 34% during this latest second quarter and which was up from 27% in Q2 2024.
Shares in the Nasdaq 100 company retreated 1% in after-hours post results US trading having about doubled over the last year. The Nasdaq 100 index is up 17% over that time. Rival streamer The Walt Disney Co (NYSE:DIS) has gained around a quarter.
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Netflix at the end of 2024 moved to focus on sales and profits and away from customer subscription numbers which totalled over 300 million at that time.
Netflix expects revenue for the current third quarter to grow 17% from Q3 2024 to $11.5 billion, potentially pushing earnings for the period up 27% to $6.87 per share.
Total viewing during the first half of the year increased 1% year-over-year to 95 billion hours. Popular shows included ‘Adolescence’ from the UK, all three seasons of ‘Squid Game’ from Korea, and ‘Zero Day’ from the US.
Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares, highlighting Netflix as a ‘top pick’ and raising its target price to $1,500 per share from a previous $1,450.
Third-quarter results are likely to be announced mid to late October.
ii view:
Started in 1997, Netflix today employs around 14,000 people. Headquartered in Los Gatos, California, its home US market accounted for most revenues in 2024 at 41%. That was followed by Europe, the Middle East, and Africa (EMEA) at 32%, Latin America 12%, Asia 11%, and Canada the balance of 4%.
For investors, a move to exclude customer subscription numbers arguably reduces investor transparency. A forward price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Costs for businesses generally remain elevated, while unlike competitors such as Apple Inc (NASDAQ:AAPL), Sky owner Comcast Corp Class A (NASDAQ:CMCSA) and ITV (LSE:ITV), Netflix does not currently pay a dividend.
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More favourably, a focus on growing revenue and profit is now being made. Revenues now include both subscription fees and relatively new advertising sales, with AI technology expected to enhance ad targeting and innovation. Expected free cashflow of $8.5 billion over 2025 supports ongoing investment, while non-English language series and films now account for more than one-third of all Netflix viewing.
In all, and while competitors are not standing still, established strong viewing engagement and the continued global switch from linear TV to streaming is likely to continue aiding this icon of the modern media world.
Positives:
- Management initiatives such as advertising
- Geographical diversity
Negatives:
- Intense competition from Disney, Apple and others
- Subject to currency movements given overseas customer base
The average rating of stock market analysts:
Buy
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