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Netflix in Focus After Strong Q4 Earnings With Huge Short-Term Upside
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Key Takeaways
Netflix posted strong Q4 results as paid memberships topped 325 million and engagement trends improved.
NFLX ad revenues grew more than 2.5x to over $1.5B in 2025, aided by expanding ad tech and AI-based tools.
Netflix guided for 15.3% Q1 2026 revenue growth and targets $50.7 - $51.7B in 2026 sales with higher margins.
Netflix Inc. (NFLX - Free Report) reported strong fourth-quarter 2025 earnings results driven primarily by membership growth, increased advertisement revenues and solid operational performance. The company’s global streaming platform spans across 190+ countries.
NFLX surpassed the 325 million paid memberships milestone during the fourth quarter of 2025. Membership dynamics showed signs of reacceleration as engagement strengthened. Branded original content viewership increased 9% in the second half of 2025, while total viewing hours increased 2% annually.
Robust Ad Revenues and Operational Efficiency
Netflix made great progress growing advertising revenues in 2025. Ad revenues grew more than 2.5 times year over year in 2025 to more than $1.5 billion. Despite facing strong competition from The Walt Disney Co. (DIS - Free Report) and Amazon.com Inc.’s (AMZN - Free Report) Prime Video, the company continued to enhance its advertising technology capabilities.
In 2025, NFLX began testing new artificial intelligence (AI) tools to help advertisers create custom ads based on its 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.
NFLX 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%.
Netflix had cash and cash equivalents of $9.03 billion as of Dec. 31, 2025. The company reported non-GAAP free cash flow of $1.87 billion in the fourth quarter compared with $1.38 billion in the prior-year period.
Solid Guidance
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, NFLX forecasts revenues of $50.7 billion to $51.7 billion. This suggests 12% to 14% year-over-year growth driven by increases in membership and pricing, along with a rough doubling of ad revenues in 2026 from 2025. The company is targeting a 2026 operating margin of 31.5%, up from 29.5% in 2025.
Strong Estimate Revisions
The Zacks Consensus Estimate for current-year and next-year revenues is now projected to grow 13.2% and 11.5%, respectively. The Zacks Consensus Estimate for current year and next year EPS is currently projected to grow at 24.1% and 20.3%, respectively. The current Zacks Consensus Estimate for long-term (3-5 years) EPS growth rate is 18%, higher than the S&P 500’s growth rate of 15.8%.
Huge Short-Term Price Upside
Netflix is currently trading at a massive 55.7% discount to its 52-week high price level. The short-term average price target of brokerage firms for the stock represents an increase of 36.2% from the last closing price of $117.29. The brokerage target price is currently in the range of $92-$150. This indicates a maximum upside of 74.2% and a downside of 6.8%.
The chart below shows the price performance of NFLX in the past month.
Image Source: Zacks Investment Research
Investment Thesis
Currently, Netflix carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company’s proposed acquisition of Warner Bros. Discovery Inc. (WBD - Free Report) for a consideration of $82.7 billion could be a game-changer if materialized. At this stage, it will be prudent to buy NFLX on every dip. Hold this stock for the long term as its extensive AI thrust and robust projections are likely to generate more value.
Image Source: Zacks Investment Research
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Netflix in Focus After Strong Q4 Earnings With Huge Short-Term Upside
Key Takeaways
Netflix Inc. (NFLX - Free Report) reported strong fourth-quarter 2025 earnings results driven primarily by membership growth, increased advertisement revenues and solid operational performance. The company’s global streaming platform spans across 190+ countries.
NFLX surpassed the 325 million paid memberships milestone during the fourth quarter of 2025. Membership dynamics showed signs of reacceleration as engagement strengthened. Branded original content viewership increased 9% in the second half of 2025, while total viewing hours increased 2% annually.
Robust Ad Revenues and Operational Efficiency
Netflix made great progress growing advertising revenues in 2025. Ad revenues grew more than 2.5 times year over year in 2025 to more than $1.5 billion. Despite facing strong competition from The Walt Disney Co. (DIS - Free Report) and Amazon.com Inc.’s (AMZN - Free Report) Prime Video, the company continued to enhance its advertising technology capabilities.
In 2025, NFLX began testing new artificial intelligence (AI) tools to help advertisers create custom ads based on its 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.
NFLX 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%.
Netflix had cash and cash equivalents of $9.03 billion as of Dec. 31, 2025. The company reported non-GAAP free cash flow of $1.87 billion in the fourth quarter compared with $1.38 billion in the prior-year period.
Solid Guidance
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, NFLX forecasts revenues of $50.7 billion to $51.7 billion. This suggests 12% to 14% year-over-year growth driven by increases in membership and pricing, along with a rough doubling of ad revenues in 2026 from 2025. The company is targeting a 2026 operating margin of 31.5%, up from 29.5% in 2025.
Strong Estimate Revisions
The Zacks Consensus Estimate for current-year and next-year revenues is now projected to grow 13.2% and 11.5%, respectively. The Zacks Consensus Estimate for current year and next year EPS is currently projected to grow at 24.1% and 20.3%, respectively. The current Zacks Consensus Estimate for long-term (3-5 years) EPS growth rate is 18%, higher than the S&P 500’s growth rate of 15.8%.
Huge Short-Term Price Upside
Netflix is currently trading at a massive 55.7% discount to its 52-week high price level. The short-term average price target of brokerage firms for the stock represents an increase of 36.2% from the last closing price of $117.29. The brokerage target price is currently in the range of $92-$150. This indicates a maximum upside of 74.2% and a downside of 6.8%.
The chart below shows the price performance of NFLX in the past month.
Image Source: Zacks Investment Research
Investment Thesis
Currently, Netflix carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company’s proposed acquisition of Warner Bros. Discovery Inc. (WBD - Free Report) for a consideration of $82.7 billion could be a game-changer if materialized. At this stage, it will be prudent to buy NFLX on every dip. Hold this stock for the long term as its extensive AI thrust and robust projections are likely to generate more value.
Image Source: Zacks Investment Research