Netflix Earnings Looms Large – What to Expect

Netflix (NASDAQ: NFLX), the undisputed heavyweight champion of streaming, has set an ambitious target to achieve a $1 trillion market valuation by 2030. To reach this goal, the streaming giant plans to substantially increase its financial performance over the next few years.

In light of this target, Netflix aims to double its revenue and triple its operating income by 2030. Current objectives for the next five years include reaching an annual revenue of $80 billion, generating $9 billion in ad revenue, and achieving a total operating profit of $30 billion.

This has built significant anticipation for the tomorrow’s earnings release, coming after the closing bell. Analysts are forecasting strong Q1 results, projecting revenue of $10.5 billion, representing a 12% year-over-year increase, and earnings per share (EPS) of $5.73, up 8.7% YoY. These optimistic projections bank on the continued positive impact of the 2024 initiatives like the password-sharing crackdown, price hikes, and ad-tier adoption.

Perhaps the most significant cloud gathering is the concern over decelerating subscriber growth in 2025, amplified by Netflix’s controversial decision to cease reporting quarterly paid membership numbers later this year. This move, while potentially aimed at shifting focus towards revenue and engagement metrics, has unnerved some investors who rely on subscriber counts as a key barometer of platform health.

Furthermore, margin pressure is a growing concern as Netflix invests heavily in expensive content, including blockbuster deals for live sports rights like the NFL, WWE, and the upcoming FIFA Women’s World Cup (2027/2031), alongside its vast slate of original series and films. The recent success of shows like Adolescence, which topped UK TV ratings with 6.45 million viewers, underscores its content prowess but also highlights the continuous need for costly hits.

What Comes Next

In 2024, the company reported an annual revenue of $39 billion, marking a 16% growth from the previous year. Meanwhile, global ad revenue for the year was approximately $2.12 billion, having doubled from 2023. Operating profit stood at $10.4 billion, with an operating margin of about 27%.

Subscriber growth is another key focus for Netflix, with the company adding 18.9 million subscribers in Q4 2024. This boost brought the total subscriber count to 301.6 million. The company is targeting further growth in international markets such as India and Brazil, aiming for a subscriber base of around 410 million by 2030.

Netflix also plans to enhance its ad-supported tier, which has seen significant uptake. This offering, introduced in late 2022, accounted for 43% of new sign-ups in February, up from 40% in January. The company is transitioning from Microsoft’s ad tech to its own in-house solution, set to roll out this month.

However, analysts have noted that Netflix’s financial targets are quite optimistic. Projections for 2030 estimate revenue at $75 billion and operating profit at $27.5 billion, both figures slightly below Netflix’s own targets. Moreover, the current earnings per share (EPS) projection suggests a share price of about $2,265, resulting in a market cap of approximately $967 billion.

To achieve the $1 trillion valuation, Netflix’s stock would need to climb from its current value of $931 to roughly $2,335 by 2030. The stock price (NASDAQ: NFLX) has grown 10.10% this year, against the backdrop of much uncertainty. This makes Netflix a significant outperformer, yet not immune to broader macroeconomic pressures.

Over the past 52 weeks, Netflix shares have surged an impressive 58%, a rally largely fuelled by strategic successes that silenced many sceptics. The company decisively cracked down on password sharing, rolled out a burgeoning ad-supported tier, and implemented price hikes, bolstering its top and bottom lines. This culminated in surpassing the 300 million global paid subscriber milestone in late 2024 and high-profile content wins, such as its NFL Christmas Day broadcasts which captivated over 30 million viewers per game, demonstrating its growing cultural and commercial clout.

Analysts Like The Stock, But Gap Closing

While a strong majority of analysts maintain a positive outlook – 14 out of 18 recently tracked analysts rate NFLX a “Buy,” and the broader consensus across 33 analysts leans towards “Buy” – there are notable divergences in conviction and price targets. The consensus price target sits around $1,065, implying ~10% upside from current levels. Bulls like Morgan Stanley have designated Netflix a “Top Pick,” citing its perceived resilience even in a potentially weakening macroeconomic climate, while Wedbush Securities holds a bullish $1,150 target, praising the company’s “unassailable lead” in the streaming wars.

Conversely, bears point to significant risks. JPMorgan recently trimmed its price target to $1,025, explicitly citing the potential for a tariff-induced recession (pegging the probability at 60% in 2025), which could severely impact advertising budgets – a crucial growth vector for Netflix’s ad tier – and overall consumer discretionary spending.

Netflix enters this earnings season from a position of strength, built on successful strategic shifts and a massive global footprint of over 300 million paid memberships. Yet, it faces legitimate questions about maintaining growth momentum, justifying its premium valuation, and navigating an increasingly uncertain economic landscape.

The company’s ability to successfully balance ambitious content investments, particularly in live sports, with sustainable profitability and user retention will determine whether it can continue its blockbuster run or if a plot twist awaits shareholders.