Coming into Netflix's (NFLX 1.70%) third-quarter earnings report, there was some hope that the streaming giant would offer investors a stock split.
After all, Netflix now has one of the highest share prices of any stock on the stock market, having passed $1,000 a share earlier this year, and it's not looking back.
Three years after the company spooked investors by reporting two straight quarters of declining subscriber growth, the company looks stronger than ever. It's executing in all four of its geographic regions. Its streaming competition like Disney and Warner Bros. Discovery has faded, and its addition of an advertising tier has paid off, helping to deliver steady growth, adding a new revenue stream, and giving customers a more affordable option.
Netflix didn't announce a stock split, despite a share price that is hovering around $1,200. However, investors arguably got something better. Let's take a look at the third-quarter earnings report before discussing that opportunity.
Netflix shines again
Not only has Netflix returned to solid growth, but it's also been a model of consistency, with revenue up 17.2% to $11.5 billion, which matched estimates. Backing out an expense related to a dispute with Brazilian tax authorities, it had an operating margin of 31.5%, which is head and shoulders above any of its streaming rivals. On the bottom line, Netflix reported earnings per share of $5.87, up from $5.40, but worse than the consensus at $6.97, as that figure does not adjust for the tax issue.
Netflix no longer reports subscriber numbers, so parsing the growth of its business isn't as easy, but there are a number of promising signs. The company said that view share reached a record in both the U.S. and the U.K., up 15% and 22%, respectively, since Q4 2022 to 22%.
The quarter marked its best ad sales period ever, and it doubled its commitments in the U.S. upfronts, showing its ad strategy is paying off. Meanwhile, it continued to excel in all four of its regions, with revenue-neutral growth of 15% or better.
Netflix's content slate also continues to impress. In fact, it released its most-watched movie in the third quarter with KPop Demon Hunters. Looking ahead to the fourth quarter, it has a strong lineup of movies and shows, including the final season of Stranger Things.
Its forecast called for revenue growth of 16.7% to $12 billion, while it expects an operating margin of 23.9%, up two percentage points from the year before. The sequential decline reflects increased seasonal content spend in the fourth quarter.
What's better than a stock split?
Despite the strong results and solid guidance, Netflix stock still fell on the news, declining 6.5% in after-hours trading.
If that sell-off holds, Netflix stock will be about as cheap as it's been in the last five months. In other words, it looks like a great buy-the-dip opportunity, and Netflix is now down 13.3% from its peak earlier this year.
In addition to these numbers, Netflix is also making smart strategic moves, like a new partnership with Spotify to stream select video podcasts, tapping into a category that Netflix has previously ignored.
The company is also using generative AI to improve its recommendations and content discovery, and it continues to experiment with live entertainment, hosting an NFL doubleheader on Christmas Day and more boxing matches.
Netflix might look expensive after surging in recent years, but based on 2026 estimates, it trades at a price-to-earnings ratio of 35, which looks reasonable, considering the runway of growth ahead of it with advertising and balanced global growth and its industry dominance.
While a stock split might have given the stock a bounce, the sell-off is a real opportunity to get this top stock at a discount.
