When it comes to Netflix (NFLX 3.36%), love isn't blind. The world's leading premium video streaming service needs to prove itself on a quarterly basis. It's earnings season now, and it's up to Netflix to show that the connection it made with you in the pod can survive in the real world.
If you're not a fan of the popular Love Is Blind reality series on Netflix, some of that won't make sense. Bear with me. Netflix will announce its third-quarter results on Tuesday afternoon. There are three things that the streaming service stocks bellwether can't afford to mess up. Let's dive in to see what investors should watch with this week's critical financial update.
1. Getting back to winning again
It's hard for Netflix investors to complain. The stock is trouncing the market over the past year, just as it has for longer investing horizons. However, two notable winning streaks came to an end after this summer's second-quarter update.
The quarterly report seemed to check off all of the right boxes that investors like to see. Revenue growth of 16% exceeded expectations, and it also landed comfortably ahead of Wall Street profit targets. It also boosted its guidance. The market was still unimpressed, sending the shares lower the following market day.
The "beat and raise" performance is par for the course when it comes to Netflix. Sliding on the news is the head-scratcher. The shares had moved higher on similar better-than-expected results in the recent past. Here is how the shares reacted on the trading day following its earnings release over the past year:
- July 18, 2025: Down 5%
- April 21, 2025: Up 2%
- Jan. 22, 2025: Up 10%
- Oct. 18, 2024: Up 11%
The 5% decline in a single day isn't a portfolio breaker. The stock is still up a whopping 74% over the past year. It is a sign that the market has heightened expectations when it comes to Netflix. The summertime update ended an even longer streak. Check out the stock's three-year chart heading into this week's financial showdown.
Data source: YCharts.
It's fine to admire the overall stock chart. Netflix has more than quadrupled over the past three years. However, take a closer look at every purple E on the chart. That is the day that Netflix offered up its quarterly results. If you go back to the third quarter of 2023 -- the fourth E from the left -- you will notice that the stock has moved higher between earnings reports.
The daily moves are interesting, but the three-month move between the reports is the real wealth-creator. Netflix has moved higher between earnings reports for seven consecutive quarters, until the second quarter of this year. Barring a torrid rally before Tuesday's close, this is another winning streak that is coming to an end. A blowout quarter can help Netflix start a new winning streak for the daily and quarterly price actions.
2. Considering price hikes
Expectations heading into the third-quarter reveal are fair. Analysts see revenue accelerating for the three months ending in September, rising 17% to $11.5 billion. They see profitability growing even faster, surging 29% to $6.97 a share.
These are big jumps. The top-line jump that analysts are modeling would be Netflix's biggest increase in revenue in more than four years. The problem -- and the reason why I called expectations fair -- is that this is essentially the bar that Netflix set for itself three months ago. Guidance back in July called for net income of $6.87 a share on a similar 17% step-up in revenue for the third quarter.
The more interesting part of the report to watch for is if the company makes any comments on raising prices for its service. Rival Walt Disney announced hikes across most of its premium streaming services last month. They coincidentally kick in on Tuesday. It wasn't a surprise. This is the fourth year in a row that the media stock giant has lifted subscription prices for Disney+ and Hulu. Netflix has also increased its rates over the years, and its last move came in January. It could signal an upcoming pricing change during the report, potentially moving the stock on that news.
Image source: Getty Images.
3. It could be time for a stock split
There's no denying that Netflix is long overdue for a stock split. It hasn't declared a split since the summer of 2015. The stock is head-turning 1,100-bagger in that time, so one can argue that a stock split isn't necessary. However, with so many other growth stocks with four-figure price points executing stock splits in recent years it's just a matter of time for Netflix.
It's easy to be skeptical about the potential timing of a stock split this week. Netflix didn't announce one in the previous seven quarters when its stock was ascending. Why would it do so now when it has moved lower since its last financial update? It's a fair point, but if Netflix has a truly strong report -- potentially padded with some encouraging developments or a price hike -- it could be enough to put a stock split in play.
Stay close. You never know when Netflix will go KPop Demon Hunters -- another piece of popular Netflix programming -- on the naysayers.
