VALUATION HIGHLIGHTS

1. International Streaming Subscriptions constitute 60% of the Trefis price estimate for Netflix's stock.
2. U.S. Streaming Subscriptions constitute 40% of the Trefis price estimate for Netflix's stock.

WHAT HAS CHANGED?

Latest Earnings: Q4 Fiscal Year 2025

Netflix reported strong Q4 2025 results with revenue reaching $10.85 billion, an 18% increase year-over-year. Earnings per share (EPS) came in at $6.12, up 21% from the prior year period. Performance was primarily driven by the continued rollout of the ad-supported tier and a significant crackdown on password sharing, which converted millions of households into paid subscribers. Additionally, the success of localized content in international markets boosted average revenue per member (ARM) despite currency fluctuations.

Note: Netflix's FY'25 ended on December 31, 2025.

Live Sports and Events Expansion

Netflix has made a decisive pivot toward live programming to bolster its advertising tier. Following the massive viewership of its Christmas Day NFL games and the successful transition of WWE Raw to the platform in January 2025, the company is positioning itself as a legitimate competitor to traditional broadcast television. This strategic move aims to capture a larger share of the $60 billion linear TV advertising market by offering brands high-reach, scheduled events alongside its on-demand library.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Netflix's value that present opportunities for upside or downside to the current Trefis price estimate:

Streaming Membership

• Netflix's global paid subscriber base has reached record highs, but the primary growth engine is now the ad-supported tier. While Trefis estimates steady growth in mature markets, the rapid adoption of the "Standard with Ads" plan provides significant upside if the ad revenue per user continues to outpace the pricing of the standard ad-free tier.
• Average Revenue per Member (ARM) is being influenced by two opposing forces. While the ad-tier pricing is lower, the incremental ad revenue and recent price hikes on premium plans in the U.S. and Europe suggest a potential 5-8% upside to our current revenue projections if churn remains low.

For additional details, select a driver above or a division from the interactive Trefis split for Netflix at the top of the page.

BUSINESS SUMMARY

Netflix is the world's leading entertainment service, operating a subscription-based business model that provides streaming movies, television series, and games across a wide variety of genres and languages. The company has shifted its focus from pure subscriber growth to a balanced approach of revenue optimization through diverse pricing tiers and advertising.

SOURCES OF VALUE

Netflix's market leadership is sustained by its massive scale and its ability to monetize content across a global footprint more efficiently than its competitors.

Content Library and Production Scale

Netflix's primary advantage lies in its vast, data-driven content library. Unlike competitors who rely on legacy franchises, Netflix uses member viewing data to greenlight projects with high hit probabilities. This efficiency allows them to maintain a lower content-spend-to-revenue ratio than Disney or Warner Bros. Discovery, supporting superior operating margins that currently exceed 20%.

Global Infrastructure and Localization

The company's localized content strategy is a major source of value. By producing high-quality original content in over 50 countries, Netflix creates "local hits" that often become global sensations (e.g., Squid Game, Lupin). This global-to-global pipeline allows Netflix to capture market share in developing regions where competitors struggle to gain a foothold due to a lack of relevant local programming.

KEY TRENDS

The Rise of Ad-Supported Streaming

The industry is moving toward a hybrid model where advertising subsidizes the cost of content for consumers. Netflix has successfully transitioned from a purely ad-free platform to one where the ad tier accounts for over 40% of new sign-ups in available markets. This trend is critical as it opens up a new revenue stream that is less sensitive to the "content treadmill" and more aligned with traditional media valuation metrics.

Monetization of Shared Households

Netflix is leading the industry trend of ending the "free-rider" era of streaming. By implementing sophisticated paid-sharing features, the company has effectively increased its total addressable market without needing to find entirely new users. This strategy has provided a massive boost to free cash flow, allowing the company to fund share buybacks and reduce its reliance on external debt for content financing.