ii view: new era for Netflix after earnings beat

First-quarter results to 31 March

• Revenue up 13% year-over-year to $10.54 billion (£7.9 billion)
• Earnings per share (EPS) up 25% from a year ago to $6.61 per share 

Guidance:

• Expects second-quarter revenue to grow 15% to $11.04 billion
• Expects second-quarter earnings to grow 44% year-over-year to $7.03 per share
• Continues to expect full-year 2025 revenues to grow 14-17% to between $43.5 billion and $44.5 billion 

ii round-up:

Netflix Inc (NASDAQ:NFLX) has detailed revenue and profits that beat Wall Street forecasts, as the streaming giant moved to focus on results and away from customer subscription numbers. 

Increased subscription prices pushed first-quarter revenues up 13% year-over-year to $10.54 billion (£7.9 billion), fuelling a one-quarter improvement in adjusted earnings to $6.61 per share. Analysts had expected $10.52 billion and $5.71 per share respectively. In January, Netflix increased its standard subscription to $17.99 from $15.49 per month, with the ad-supported plan rising to $7.99 from $6.99.    

Shares in the Nasdaq 100 company rose around 2% in post results trading having come into this latest news up around 8% year-to-date. That’s in contrast to falls of over 20% for rival streamers Apple Inc (NASDAQ:AAPL), The Walt Disney Co (NYSE:DIS) and Prime owner Amazon.com Inc (NASDAQ:AMZN). The Nasdaq 100 index is down 15% in 2025, hindered by concerns about US tariffs. 

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Netflix continues to forecast growth in currency adjusted revenues for the full year 2025 of between 14% and 17% to a potential $43.5-to-$44.5 billion. 

The California headquartered company predicts second-quarter revenues to the end of June will grow 15% year on year to $11.04 billion, potentially taking earnings up 44% to $7.03 per share. 

Global subscribers reported at the end of 2024 exceeded 300 million, with a gain of 19 million customers during the final quarter of the year, driven by events such as NFL football coverage and the Mike Tyson versus Jake Paul boxing match. Walt Disney subscribers total nearer 170 million. 

Netflix is now expected to occasionally detail subscriber numbers when they hit key milestones. 

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Broker Morgan Stanley raised its estimate of fair value to $1,200 per share following the results, up from $1,150 previously, reiterating its ‘overweight’ stance and flagging Netflix as a ‘top pick.’

Second-quarter results are likely to be announced mid to late July. 

ii view:

Aided by growth in home internet connections, Netflix began online streaming in 2007, nearly a decade after it started a DVD-by-mail movie rental service. Geographically, the USA 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, US imposed trade tariffs could see other countries retaliating via taxes on US services such as Netflix subscriptions. A move to exclude customer subscription numbers arguably reduces investor transparency. A forecast price/earnings (PE) ratio in line with the three-year average may suggest the shares are not neccessarily good value, while unlike competitors such as Apple, Sky owner Comcast Corp Class A (NASDAQ:CMCSA)and ITV (LSE:ITV), Netflix does not currently pay a dividend.

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To the upside, a focus on growing revenue and profits is now being made. Revenue now includes both subscription fees and relatively new advertising sales to corporations. A robust balance sheet and expected free cashflow of $8 billion in 2025 support ongoing investment, while Netflix’s 300 million subscribers was previously estimated by Wall Street to equate to 40% of the global addressable household broadband market of around 750 million.

For now, and despite ongoing risks, established strong viewing engagement and the continued global switch from linear TV to streaming, should continue to benefit this now established titan of the 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