Netflix (NFLX +0.04%) shares have had a volatile few weeks. The stock sold off after the company's third-quarter report late last month as investors focused on an earnings miss driven by a tax dispute in Brazil and a valuation that may have been getting ahead of itself. Still, the report largely revealed an underlying business continuing to trend in the right direction. The difference in the business trajectory and the stock market reaction to the report, therefore, created a good opportunity to reconsider the stock.
With shares trading lower and some fresh metrics to dig into, here are four reasons Netflix stock looks like a buy today.
Image source: Netflix.
1. Revenue growth is firmly back in double digits
In 2024, Netflix grew revenue 16% for the full year, reversing the slower growth it saw earlier in the decade. That momentum has carried into 2025. Revenue in the first quarter rose 12.5% year over year to $10.5 billion, then accelerated to 15.9% growth in Q2. By the third quarter, Netflix's year-over-year revenue growth rate accelerated to 17.2% with quarterly sales totaling $11.5 billion, giving Netflix eight straight quarters of double-digit top-line expansion and a clear acceleration across 2025. That improvement reflects a combination of higher prices, rising engagement, continued subscriber growth, and a growing contribution from advertising.
This kind of mid-teens revenue expansion at Netflix's current scale suggests the company is still in a healthy growth phase rather than a mature, slow-growth stage.
2. Margin expansion with more to come
Additionally, Netflix has been widening its operating margins as it scales. The company's operating margin expanded six percentage points in 2024 to 27%. More recently, Netflix's third-quarter operating margin contracted year over year, but that was due to a $619 million charge tied to a Brazilian tax dispute. Management has said that without this one-time cost, it would have exceeded its 31.5% margin forecast for the quarter. Additionally, even after lowering full-year operating margin guidance to account for that tax issue, Netflix now expects a 2025 operating margin of about 29%, up from last year's 27%.
3. Advertising is still early but is scaling fast
The company's push into advertising is another important part of the story. Netflix's ad-supported tier launched in 2022, and management now says advertising revenue is on track to more than double in 2025 from a still "relatively small" base.
"We have a solid foundation and are increasingly confident in the outlook for our ads business," management wrote in the third-quarter shareholder letter.
Recently, Netflix disclosed that ads on its service now reach more than 190 million monthly active viewers across the 12 countries where the ad tier is available.
If the company continues to grow that audience while improving targeting and measurement, advertising could become a meaningful profit driver over time rather than just a supplement to subscription revenue.
NASDAQ: NFLX
Key Data Points
4. A reasonable valuation
After a big run since early 2024, Netflix is no longer cheap in absolute terms. Shares command a price-to-earnings ratio of about 47, and a forward multiple of about 37.
But that valuation needs context. Netflix is growing revenue in the mid-teens, expanding operating margins toward the high-20s, and generating billions of dollars in free cash flow each year. For a company like this, shares don't need to be cheap to make them a buy.
There are real risks here, namely intense competition from deep-pocketed tech giants who have their own streaming services. Incumbents like Walt Disney also want a piece of the growing streaming pie. Additionally, there's valuation risk; if growth slows, the stock's premium multiple could compress quickly.
Still, for investors willing to accept the uncertainty, Netflix offers a rare combination of strong revenue growth, improving profitability, growth opportunities in advertising, and a reasonable valuation.
