Netflix is a global streaming and content‑production company that generates subscription‑driven recurring revenue and has shifted in recent years toward multi‑billion dollar operating cash flow and materially higher profitability.
The company’s top‑line and per‑share expansion are clear: revenue per share has risen to $10.40 (period end 2025‑12‑31) after a roughly 12–16% annual pace recently, with one‑year Revenue Per Share growth of 15.9% (most recent full year) and diluted EPS at $3.08 (period end 2026‑03‑31) after one‑year EPS growth of 44.3%; the five‑year EPS CAGR is about 28.9%.—all indicating sustained per‑share compounding [EPS Diluted & Revenue per Share], [Revenue & EPS Growth], [Revenue & Net Income].
Profitability metrics have improved meaningfully: gross margin is in the high‑40% range (most recent 48.1%), operating margin around 27.6%, and net margin roughly 24.3% (latest observations), while Return on Equity sits near 43.0%—reflecting strong asset returns and pricing power [Profit Margin Trends], [Return on Equity (ROE)].
Operating cash flow (TTM) has climbed to $10.15B from roughly $3.3B in early 2023, and trailing net income has moved into double‑digit billions ($13.37B most recently), supporting durable cash generation [Strategic Capital Allocation], [Revenue & Net Income].
At the same time, there are areas to monitor. Reported net income of $13.37B (TTM) currently outpaces operating cash flow of $10.15B (TTM) by about $3.2B, and the cash conversion ratio is only just above parity at 1.03—an indicator that earnings are not entirely mirrored by cash yet [Earnings Quality Analysis], [Strategic Capital Allocation].
ROE growth shows a negative reading in the growth metric (−0.8886) despite the high absolute ROE, which flags potential volatility in returns over different measurement windows [Return on Equity (ROE)].
Capital flows have been lumpy: investing cash flow swung from large outflows to modest inflows and the most recent financing cash flow TTM is a sizable −$10.35B, while the trailing P/E has declined from a mid‑50s peak to about 31.2x—trends that affect capital allocation flexibility and market valuation dynamics [Strategic Capital Allocation], [Price-to-Earnings (PE) Ratio Trend].
Key fundamental metrics to watch going forward are revenue‑per‑share and diluted EPS growth trends (and their divergence) to assess sustainable per‑share compounding [EPS Diluted & Revenue per Share], [Revenue & EPS Growth], the gap between net income and operating cash flow and the cash conversion ratio to judge earnings quality [Earnings Quality Analysis], gross and net margin levels for pricing/scale leverage [Profit Margin Trends], and ROE plus ROE growth and the company’s investing/financing cash flow pattern to gauge capital allocation outcomes and valuation pressure [Return on Equity (ROE)], [Strategic Capital Allocation], [Price-to-Earnings (PE) Ratio Trend].
The foundation of business quality and long-term value creation
NETFLIX INC’s revenue shows a clear upward trend over the last several quarters, rising from roughly $10.54B in the quarter ended 2025-03-31 to $12.05B in the quarter ended 2025-12-31. Revenue crossed the $10B mark in late 2024 and continued to increase sequentially through 2025, with the highest reported quarterly revenue in the provided series at $12.05B (2025-12-31).
Net income has increased more markedly in the most recent quarters. After mid‑2024 results around $2.1B–$2.4B, net income rose through 2025 (peaking at $3.13B in 2025-06-30) and then jumped to $5.28B in the quarter ended 2026-03-31, the largest quarterly net income shown. The most recent quarterly revenue was $12.05B (period ended 2025-12-31). The most recent quarterly net income was $5.28B (period ended 2026-03-31).
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Jan 2025 to Dec 2025, Netflix Inc generates $45.18B in revenue. After accounting for taxes and expenses, the company retains 24.3% as net profit margin, resulting in $10.98B in net earnings from $45.18B in revenue.
Period Information
Report Type: Annual (10-K)
Period: Jan 2025 to Dec 2025
Revenue composition by disclosure category for the latest period
Analyzing long-term margin stability and competitive positioning
NETFLIX INC's margin profile shows a clear improvement in gross and net margins in the most recent quarters, with gross margin moving into the high-40% range in 2025 after several years in the high-30s to low-40s. Net profit margin has risen steadily from the low-to-mid teens in 2022–2023 to the mid-20% range through 2024–2025. Operating margin, which peaked in the mid-30% range around 2021, has moved lower into the mid-to-high 20s in 2025.
Notable inflection points in the series include:
Most recent margins as of 2025-09-30: gross 48.1%, operating 27.6%; as of 2025-12-31: net profit 24.3%.
Understanding Profit Margins
Between Jan 2025 and Dec 2025, Netflix Inc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
Over the past several quarters both metrics have trended upward, with NETFLIX INC’s trailing twelve‑month net income rising from about $6.44B at 2024-03-31 to $10.98B at 2025-12-31 and then to $13.37B at 2026-03-31. Operating cash flow (TTM) also increased over the same interval, moving from $7.31B at 2024-03-31 to $10.15B at 2025-12-31. The rise in both series after 2022 reflects a sustained recovery in cash generation and reported earnings relative to the earlier period of negative or low operating cash flow.
A notable inflection is the steady climb in operating cash flow from sub‑$1B in early 2022 to over $10B by the end of 2025, while net income accelerated into the double‑digit billions and outpaced operating cash flow in the most recent observation. The most recent Net Income (TTM) was $13.37B (period end 2026-03-31). The most recent Operating Cash Flow (TTM) available was $10.15B (period end 2025-12-31).
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
NETFLIX INC's ROE has trended materially higher over the past three years, accelerating since mid-2023. After a trough around 18.6% on 2023-06-30 and 20.5% on 2023-09-30, ROE climbed to 30.1% by 2024-03-31 and continued rising through 2024 and 2025, reaching the low- to mid-40% range across 2025 quarters (41.1% on 2025-06-30, 40.2% on 2025-09-30, 41.3% on 2025-12-31) and culminating in the most recent quarter.
The longer historical series shows prior volatility with very high levels in 2010–2011 followed by a multi-year period of lower single- and low-double-digit ROE in the mid-2010s before the sustained rise beginning around 2019–2021. The most recent reported Return on Equity (ROE) for NETFLIX INC was 43.0% for the period ending 2026-03-31.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
NETFLIX INC’s operating cash flow TTM has shown a clear rising trend over the past two to three years, climbing from roughly $3.3B in early 2023 to $10.15B in the most recent TTM available (period end 2025-12-31). The increase was gradual through 2023–2024 (mid-single- to high-single-digit billions) and accelerated across 2025, with notable step-ups each quarter from $7.94B (2025-03-31) to $9.07B (2025-06-30), $9.57B (2025-09-30) and finally $10.15B (2025-12-31).
Investing cash flow TTM has been volatile, shifting between large negative outflows (e.g., -$2.18B at 2024-12-31 and -$1.62B at 2025-03-31) and positive inflows in late 2025 (about $1.14B at 2025-09-30 and $1.04B at 2025-12-31) before moving to a modest negative of -$225.8M in the latest TTM (period end 2026-03-31).
Financing cash flow TTM has been predominantly negative with increasing outflows through 2023–2025, reaching a peak TTM outflow of -$10.35B (period end 2025-12-31). The most recent trailing twelve-month values are: Operating Cash Flow TTM $10.15B; Investing Cash Flow TTM -$225.8M; Financing Cash Flow TTM -$10.35B.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
Over the last year NETFLIX INC’s trailing twelve—month P/E has trended downward. It peaked at 56.8x on 2025-06-30, then moved to 49.9x (2025-09-30), 37.1x (2025-12-31) and declined further to 31.2x in the most recent quarter (2026-03-31). Earlier quarters just prior to mid—2025 showed P/E readings in the low— to—mid 40s (43.7x on 2025-03-31 and 44.4x on 2024-12-31).
Looking further back, the series shows much larger volatility in earlier years with multiple very high historical peaks (for example 463.5x on 2013-03-31 and several values above 100x through 2016–2018) and a trough of 14.9x on 2022-06-30 before recovering into the 30–50x range in recent quarters. The most recent reported P/E ratio was 31.2x as of 2026-03-31.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.