Netflix (NFLX Quick QuoteNFLX - Free Report) reported fourth-quarter 2025 earnings of 56 cents per share, which beat the Zacks Consensus Estimate by 1.82%. The figure increased 30.2% from the year-ago quarter.

Revenues increased 18% year over year (17% on a foreign exchange neutral basis) to $12.05 billion, driven primarily by membership growth, higher subscription pricing, and increased advertising revenues. The figure exceeded the consensus mark by 0.67%.

Despite unfavorable foreign exchange movements during the quarter, revenues were 1% above guidance due to stronger-than-forecasted membership growth and ad sales. Netflix crossed the 325 million paid memberships milestone during the quarter.

Netflix effected a 10-for-1 forward stock split on Nov. 14, 2025. All share and per share amounts in the fourth-quarter 2025 earnings report have been retroactively adjusted to reflect this split.

Strong Operating Performance Despite Acquisition Costs

Netflix delivered robust operational performance in the fourth quarter. Operating income reached $2.96 billion, up 30% year over year, with operating margin expanding two percentage points to 24.5%, both slightly ahead of forecast due to the revenue upside.

Net income included approximately $60 million of costs (booked in interest expense) related to the company's recent Warner Bros.-related bridge loan and associated bridge reduction financings, which were not included in guidance.

All regions experienced healthy year-over-year revenue growth. United States and Canada revenues increased 18% year over year to $5.34 billion, Europe, the Middle East and Africa grew 18% to $3.87 billion, Latin America rose 15% to $1.42 billion, and Asia-Pacific increased 17% to $1.42 billion.

Marketing expenses were $1.11 billion in the quarter. Technology and development expenses totaled $890.3 million. General and administration expenses reached $567.8 million.

Record Engagement Driven by Strong Content Slate

With over 325 million paid memberships, Netflix is now serving an audience approaching one billion people globally. In the second half of 2025, members watched 96 billion hours on Netflix, up 2% (+1.5 billion hours) year over year versus a 1% increase in the first half of the year.

This growth was driven by viewing of originals, which was up 9% year over year in the second half of 2025 due, in part, to the company's strong fourth-quarter branded slate.

The fourth-quarter featured exceptional content performance led by the massive final season of Stranger Things, which generated 120 million views. The series finale became a cultural phenomenon and drove significant engagement.

Other successful fourth-quarter releases included Nobody Wants This S2 (31 million views), Selling Sunset S9 (11 million views), anime series Record of Ragnarok S3 from Japan (13 million views), Culinary Class Wars S2 from Korea (10 million views), and Emily in Paris S5 (41 million views).

New shows from around the world performed strongly, with The Beast in Me from the United States generating 48 million views, The Asset from Denmark achieving 24 million views, Rulers of Fortune from Brazil attracting 23 million views, and Last Samurai Standing from Japan garnering 22 million views.

The documentary slate was robust, featuring Being Eddie (12 million views), The Perfect Neighbor (50 million views), Sean Combs: The Reckoning (54 million views), and Babo from Germany (7 million views).

Stand-up comedy continued to be a strength, with Dave Chappelle: The Unstoppable… (17 million views), Kevin Hart: Acting My Age (13 million views), Leanne Morgan: Unspeakable Things (5 million views), Matt Rife: Unwrapped - A Christmas Crowd Work Special (8 million views), Tom Segura: Teacher (5 million views), and Ricky Gervais: Mortality (7 million views).

The film slate was exceptionally broad, featuring Guillermo del Toro's Frankenstein (102 million views), Wake Up Dead Man: A Knives Out Mystery (66 million views), A House of Dynamite (78 million views), Jay Kelly (21 million views), Train Dreams (20 million views), Caramelo from Brazil (54 million views), Troll 2 from Norway (47 million views), Champagne Problems (52 million views), My Secret Santa (51 million views), and A Merry Little Ex-Mas (40 million views).

Live Events Drive Outsized Value

Netflix's live programming strategy continued to deliver disproportionate impact. While accounting for a small proportion of total view hours, big live events like Anthony Joshua's sixth-round knockout of Jake Paul drove significant excitement and signups. The fight generated 33 million average minute audience (Live+1).

NFL Christmas Day games also drove disproportionate engagement. According to Nielsen, Netflix's share of U.S. TV time reached an all-time high of 9% in December 2025, up 0.5 percentage points year over year, though linear TV still comprises more than 40% of U.S. TV screen time.

Advertising Business Accelerates Growth

Netflix made great progress growing advertising revenues in 2025. In what was only the company's third year selling advertising, ad revenues grew more than 2.5 times versus 2024 to over $1.5 billion.

The company continued to enhance its advertising technology capabilities. In 2025, Netflix began testing new AI tools to help advertisers create custom ads based on Netflix's intellectual property, with plans to build on this progress in 2026. The company also introduced automated workflows for ad concepts and used advanced AI models to streamline campaign planning, significantly speeding up these processes.

Netflix also announced partnerships to expand its content offerings, including deals to bring video podcasts from Spotify/The Ringer, iHeartMedia, and Barstool Sports to the platform, along with two new original podcasts with comedian Pete Davidson and NFL legend Michael Irvin.

Balance Sheet & Cash Flow

Netflix had cash and cash equivalents of $9.03 billion as of Dec. 31, 2025, compared with $9.3 billion as of Sept. 30, 2025. Total debt was $14.46 billion as of Dec. 31, 2025.

Streaming content obligations were $24.04 billion as of Dec. 31, 2025, compared with $20.94 billion as of Sept. 30, 2025.

Netflix reported non-GAAP free cash flow of $1.87 billion in the fourth quarter compared with $1.38 billion in the prior-year period. 

Net cash generated from operating activities in the fourth quarter was $2.11 billion compared with $1.54 billion in the prior-year period.

During the quarter, Netflix repurchased 18.9 million shares for $2.1 billion, leaving $8 billion remaining under its existing share repurchase authorization.

Warner Bros. Acquisition Update

In December 2025, Netflix announced that it would acquire Warner Bros. Discovery (WBD Quick QuoteWBD - Free Report) , including its film and television studios, HBO Max and HBO. This is expected to give Netflix a competitive edge against peers like Paramount Skydance (PSKY Quick QuotePSKY - Free Report) and Disney (DIS Quick QuoteDIS - Free Report) .

On Jan. 20, 2026, the companies amended their merger agreement to provide for an all-cash transaction valued at $27.75 per WBD share, replacing the previous mix of cash and Netflix stock.

The revised transaction structure expedites the timeline to a WBD shareholder vote and provides greater certainty of value that will be delivered at closing. Netflix obtained an increase to its bridge facility commitments of $8.2 billion to support the change to an all-cash transaction, bringing aggregate bridge facility commitments to $42.2 billion. The company anticipates reductions to these bridge facility commitments between now and closing through a combination of future bond offerings and cash it expects to accumulate on its balance sheet.

Netflix believes the proposed purchase of Warner Bros. Discovery will allow it to accelerate its business strategy through two main areas of opportunity. First, Warner Bros.' library, development and IP will allow Netflix to provide an even broader and higher-quality selection of content for members; and second, the addition of HBO Max will allow the company to offer more personalized and flexible subscription options.

Consistent with its capital allocation framework, Netflix will pause share buybacks to accumulate cash to help fund the pending acquisition of Warner Bros. The company remains committed to maintaining a solid investment-grade rating.

Strong Q1 and Full-Year 2026 Outlook

For the first quarter of 2026, Netflix expects revenues of $12.16 billion, indicating growth of 15.3% year over year. The company projects a first-quarter operating margin of 32.1%.

For full-year 2026, based on foreign exchange rates as of Jan. 1, 2026, Netflix forecasts revenues of $50.7 billion to $51.7 billion. This represents 12% to 14% year-over-year growth (or 11% to 13% foreign exchange neutral growth), driven by increases in membership and pricing, plus a projected roughly doubling of ad revenues in 2026 versus 2025.

The company is targeting a 2026 operating margin of 31.5% (based on 1/1/26 foreign exchange rates), up from 29.5% in 2025, which includes approximately $275 million of acquisition-related expenses. The margin forecast also reflects content amortization growth of approximately 10% in 2026, with higher growth in the first half than the second half due to the timing of title launches.

For 2026, assuming no material swings in foreign exchange, this Zacks Rank #3 (Hold) company expects to generate free cash flow of roughly $11 billion, which assumes a cash content spend to content amortization ratio of approximately 1.1x. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company expects ad revenues to roughly double again in 2026 to approximately $3 billion.