Netflix (NFLX 1.29%) has pulled back recently following its latest earnings report, even though the streaming service posted impressive top-line growth and continues to expect its full-year operating margin to expand. That move has some investors wondering whether this is a good time to buy one of the market's most closely watched growth stories.
Like Netflix, Alphabet (GOOG +3.26%)(GOOGL +3.50%) taps into similar streaming and digital video trends while leaning on digital advertising and subscription services. But unlike Netflix, Alphabet operates a much more diversified business, featuring Google Search, YouTube, a rapidly growing cloud platform, and even a small but important self-driving car technology business.
Both companies benefit from structural shifts in how people watch video and use the internet. But their business models and valuations point in different directions for investors deciding where to put new money to work. One arguably looks like the clear winner when comparing their investment prospects head-to-head.
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Netflix's focused streaming model
Both businesses have been growing rapidly. Netflix's third-quarter revenue rose 17% year over year to about $11.5 billion. Management expects similar growth in the fourth quarter.
Additionally, the company is guiding for operating margin expansion. Specifically, it expects its full-year operating margin to be around 29%, up from 27% last year.
NASDAQ: NFLX
Key Data Points
Netflix is also leaning into its small but meaningful advertising-supported plans, as the company's three-year-old ad business continues to grow quickly. Management has said that advertising revenue should more than double in 2025 as the ad tier and in-house ad technology scale, adding another growth lever beyond subscription growth.
But unlike Alphabet, Netflix remains heavily concentrated in subscription video. Additionally, the company must keep funding a large slate of licensed and original programming to sustain engagement, while much of Alphabet's YouTube content is user-generated.
Alphabet's diversified growth drivers
Alphabet's latest results show a broader way to tap similar streaming and online video tailwinds. In Q3 2025, revenue grew 16% year over year to about $102.3 billion, fueled by strong growth across its core Google Search platform, Google subscriptions, YouTube, and its cloud computing business.
Additionally, AI (artificial intelligence) is having a positive effect on its business.
NASDAQ: GOOGL
Key Data Points
"We are seeing AI now driving real business results across the company," said Alphabet CEO Sundar Pichai in the company's Q3 earnings release.
Alphabet's cloud business, in particular, is benefiting from AI.
"Cloud had another great quarter of accelerating growth with AI revenue as a key driver," Pichai explained during the call. "Cloud backlog grew 46% quarter over quarter to $155 billion."
YouTube sits at a useful intersection between the two companies. Like Netflix, it benefits from viewers spending more time streaming video on connected TVs, yet most of its content is user-generated or creator-led. This keeps funding needs far lower than a library of scripted series and films while still supporting meaningful ad and subscription revenue.
There's a clear winner
Ultimately, Alphabet looks like the better buy today -- and valuation is what ends up tipping the scales in its favor. Netflix trades at a price-to-earnings ratio of around 44 as of this writing, while Alphabet's ratio is closer to 29. Investors, therefore, are paying substantially less for each dollar of Alphabet earnings -- and those earnings are from a more diversified source with significant growth potential as AI positively affects its business.
Of course, both stocks have risks. Alphabet's biggest risk is that generative AI from companies like OpenAI will disrupt its core search business. Netflix competes against streaming services from several of the world's biggest tech companies. But Alphabet's lower valuation does a better job of pricing in its unique risks.
