Netflix surpassed analyst expectations for the fourth quarter in terms of both profit and revenue, which validated Netflix’s pursuit of acquiring WBD. The quarterly earnings indicated Netflix is continuing to add subscriptions, has a rapidly growing ad business, and that the increase in Netflix’s earnings position demonstrates that the company continues to grow significantly without needing WBD.
At the time Netflix announced the fourth-quarter 2025 earnings, Greg Peters, Co-CEO of Netflix, said on the call with analysts following the announcement that when reviewing the 2025 results, Netflix met or exceeded all its financial targets and that, going forward, there remain many ways for Netflix to continue growth.
The growth rate reported in the fourth quarter of 2025 was more than double the level of growth experienced in the fourth quarter of 2023, and, based on the earnings report, it appears there will continue to be significant room for growth.
In the final quarter of 2025, Netflix earned net income of $2.42 billion, compared to net income of $1.87 billion, which was reported in the final quarter of 2024 based on FactSet analyst estimates ($2.39 billion).
The company reported that EPS was 56 cents, in line with Wall Street estimates. The pre-split EPS estimate from analysts was 55 cents. The company’s 10-for-1 stock split was announced in November. Revenues increased from the previous year’s quarter-end revenues of $10.2 billion to $12.05 billion, slightly exceeding analyst estimates of $11.97 billion. Netflix has projected that total revenues will grow between 12% and 14% by 2026, and that its operating margin will reach 31.5%.
In addition, Netflix projects that its advertising revenues will grow 250% over the prior year and expects advertising revenues to Double again in 2026. However, it expects to spend more money in 2022 on producing original content as well as purchasing additional sports and live event programming rights.
As a result of those projected increased expenditures, Netflix shares fell 5% in after-hours trading, despite the fact that Netflix reported solid financial results. Since reaching a record high last June, the stock has declined 34%, particularly since Netflix began pursuing Warner Bros. in the fall of this year. “The stock is very undervalued, and it is becoming increasingly attractive,” stated John Belton, a portfolio manager at Gabelli Funds.
“Ad revenue is beginning to contribute significantly to revenue growth. If Netflix can sustain its growth in membership numbers, as well as acquire Warner Bros., I believe it is going to remain an extremely interesting investment opportunity for the coming years. However, investors will continue to be challenged to remain patient with $NFLX.”
In December, Netflix and Warner Bros. entered into a deal that was worth 82.7B; however, because of the uncertainty surrounding the deal, the future of Netflix and its operations are not certain as Paramount Skydance (a subsidiary of Paramount Pictures) is attempting to persuade its shareholders to agree to their hostile takeover bid for the entirety of Warner Bros. (including New Line Cinema, DC Films Studios, etc.) at 108B.
As well, earlier Tuesday, Netflix announced that they have changed its bid from a combined cash and stock offer to a full cash offer. While analysts believe that Netflix is offering full cash only, this was primarily due to the substantial revenues and cash flow Netflix is expected to see as their business continues to grow, with other analysts expressing concerns as to Netflix’s intentions regarding future growth and subscriber revenue growth being the driving force behind their desire for the full purchase of Warner Bros. (and everything associated with Warner Bros.).
The company announced that it surpassed 325 million subscribers globally on 12/31/2023 (as they do not report their subscriber numbers, so we do not know their actual subscriber figures from the previous quarter).
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Netflix has been aware of the increase in advertising revenue as a key source of future revenues; therefore, they are focusing their advertising strategy on the following two areas: (1) to reduce subscriber churn (i.e., the number of subscribers who leave the service) by offering a less expensive ad-supported subscription option and (2) to generate advertising revenues through traditional means of selling ads.
Currently, Netflix’s advertising business is new, and while it currently generates a small amount of total revenue, the company anticipates that this business will continue to be a source of steady future revenue growth.
Towards the end of 2022, Netflix released an advertisement-supported subscription tier at a lower price point than its premium ad-free service. This new tier has been a slow contributor to subscriber growth. The price difference between the two tiers is significant: $7.99 a month versus $24.99 a month for the ad-free version. By offering a lower price point, Netflix has gained access to a large customer base that may not subscribed at the higher price point.
In addition to this change, Netflix has been expanding into live sporting events for its subscribers, which is expected to continue driving subscribers in the future. Netflix also set bold internal growth goals last year to double its revenue by 2030 and reach a market capitalization of $1 trillion.
Currently, their market valuation is approximately $400 billion. In the earnings call, officials at Netflix stated they still believe these goals are achievable, regardless of the outcome of the proposed Warner Bros. acquisition deal.
