Once upon a time, it was industrial and energy stocks that topped the list of the world's most valuable companies. Indeed, two decades ago, General Electric and ExxonMobil led the field in terms of market cap, valued at $319 billion and $283 billion, respectively. These days, tech-centric companies, including Apple and Microsoft, top the list, with market caps of $2.9 trillion and $2.7 trillion, respectively, buoyed by the accelerating adoption of artificial intelligence (AI).
Investors would do well to remember that Netflix (NFLX 2.52%) has long been a pioneer in the use of AI. It has developed state-of-the-art algorithms that power the company's streaming recommendations and help inform its production and licensing choices.
Netflix just delivered another quarter of surprisingly robust growth and continues to push the boundaries of its streaming empire. The company currently sports a market cap of $415 billion (as of this writing) and has announced ambitious plans in hopes of joining the trillion-dollar club by 2030. The stock has generated returns of 59% over the past year and 1,090% over the past decade, and recent developments suggest its upward trajectory will continue.
Image source: Getty Images.
Bullish results
Netflix just reported its first-quarter results, which easily exceeded expectations for every critical metric. The company generated revenue of $10.54 billion, climbing 13% year over year, and robust profit growth was illustrated by earnings per share (EPS) of $6.61, which jumped 25%. Sales growth was fueled by strong subscriber additions and increases to the company's growing ad revenue. The bottom line was driven higher by expanding operating margins that increased by 360 basis points to 31.7%.
For context, analysts' consensus estimates were calling for revenue of $10.5 billion and EPS of $5.66, so Netflix beat across the board. It's worth noting that the company no longer reports subscriber numbers, a practice it abandoned last year.
Management expects the company's growth streak to continue. Netflix is guiding for second-quarter revenue of $11 billion, up more than 15%, while forecasting EPS of $7.03, which would mark an increase of 44%.
Ambitious plans for the future
Reports emerged earlier this week that suggest Netflix has ambitious plans to expand its business even further between now and 2030, according to a story that first appeared in The Wall Street Journal:
- Double revenue from $39 billion to $78 billion by 2030
- Earn $9 billion in global ad revenue, up from an estimated $2.15 billion
- Triple operating income to $30 billion, up from $10 billion in 2024
- Grow subscriber base to 410 million, up from roughly 302 million last year
- Achieve a $1 trillion market cap by 2030
To be clear, Netflix executives have since downplayed the report, though they didn't dispute its findings. During the conference call to discuss the results, co-CEO Ted Sarandos said, "On rare and very disappointing occasions, our confidential and internal discussions can leak into the press. ... We often have internal meetings and we talk about long-term aspirations." He went on to note that this was "not the same as a forecast" but part of the company's "long-range thinking." That said, it still shows that Netflix is shooting for the stars.
NASDAQ: NFLX
Key Data Points
Incremental levers for growth
Netflix has developed a multipronged strategy to help achieve these ambitious targets. The company will focus on international growth, particularly in areas with heavy broadband penetration, including Brazil and India, according to the report.
Furthermore, as Netflix's ad-supported tier hits critical mass, the company will have increasing leverage with advertisers, which should help boost its advertising revenue. During the earnings call, Netflix revealed that it launched its homegrown adtech platform in the U.S. on April 1, with plans to expand into other advertising markets in the months to come.
Netflix noted that WWE Raw, the highly rated wrestling entertainment show, "has been on our global Top 10 list every week. The company continues to lean into its recent success with live events, announcing Taylor vs. Serrano 3, a historic rematch in women's boxing. Netflix has also optioned a second NFL Game for Christmas Day 2025.
The streaming giant continues to churn out hit programming, with Adolescence becoming the company's third-most popular English language series ever. At the same time, movies Back in Action, Ad Vitam, and Counterattack have each climbed their respective Top 10 lists.
Each of these areas represents an opportunity for incremental growth, which helps illustrate how Netflix plans to achieve its lofty goals.
The path to $1 trillion
Netflix currently has a market cap of $415 billion, which means it would require stock price gains of roughly 141% to drive its value to $1 trillion. However, there's a clear path for growth over the next five years. According to Wall Street, Netflix is expected to generate revenue of $44.31 billion in 2025, giving it a forward price-to-sales (P/S) ratio of roughly 9.
Assuming its P/S remains constant, Netflix would have to grow its revenue to roughly $106 billion annually to support a $1 trillion market cap. The company will need to achieve growth of only 15% annually to achieve revenue of $89 billion by 2030, which would put it within striking distance of a $1 trillion market cap -- and multiple expansion could take care of the rest.
Wall Street is currently forecasting revenue growth for Netflix of about 14% in 2025 and 12% in 2026; however, analysts have historically underestimated the company's results.
It's worth noting that Netflix has grown its quarterly revenue by 523% over the past decade, and its net income has soared 7,000%, which helps illustrate that Wall Street's outlook may well be conservative. Furthermore, as this quarter illustrates, Netflix has routinely outpaced analysts' expectations, which could shave years off these estimates.
Finally, Netflix stock is selling for roughly 38 times forward earnings, which some investors might consider expensive. However, when weighed in the context of Netflix's strong track record of growth and its expanding opportunities, I'd argue it's a fair price to pay for a company expected to generate consistent double-digit growth for the next five years and likely much longer.
