Netflix (NFLX +1.35%) just completed a 10-for-1 stock split, moving its share price back near the hundred-dollar level while leaving the company's market value unchanged.
The split comes at a time of significant momentum for the underlying business. The streaming leader's revenue has been growing rapidly, and management expects its operating margin to expand this year -- even as Netflix spends heavily on new series and films and pushes into advertising technology and live events.
With a fresh split behind it and growth still healthy, the key question for investors is whether the current price already reflects the company's prospects, given a valuation that remains demanding.
Image source: Netflix.
Netflix is firing on all cylinders
In the second quarter of 2025, Netflix grew revenue 16% year over year, followed by 17% growth in the third quarter as paid memberships and pricing both increased -- and a small but fast-growing advertising business helped results.
Netflix's profitability has also remained robust, despite some noise. Operating margin in the third quarter landed at 28%, down from 34% in the second quarter and 30% in the third quarter of 2024 because of a Brazilian tax charge that management views as a one-off item. But Netflix notably said it would have exceeded its operating income forecast without that charge.
What's impressive is that Netflix's full-year outlook for operating margin still calls for expansion -- even with this massive cost built into the guidance. Specifically, management guided for a full-year operating margin of 28%, up from 27% last year.
Then there's the company's three-year-old advertising business. It's crushing it.
"We recorded our best ad sales quarter ever. We are now on track to more than double ad revenue this year," co-CEO Gregory Peters said.
Looking ahead
Netflix is finishing 2025 with a heavy slate that includes the final season of Stranger Things, alongside new seasons of other popular series, which should support viewing hours and make the platform more attractive to both subscribers and advertisers, ultimately helping the company finish the year strong.
Combining its recent revenue momentum with its small but fast-growing advertising business, management is optimistic about the future. Management said it expects revenue to once again grow about 17% year over year in Q4.
Impressively, Netflix expects to generate total free cash flow for the full year of 2025 of about $9 billion, even as it continues to invest in content, advertising technology, and a growing slate of live events.
Netflix's valuation after the split
Stock splits, of course, do not change intrinsic value. And Netflix's 10-for-1 split is no exception. The split increased the number of shares while reducing the price of each one, leaving the company's roughly $450 billion market capitalization intact -- and the post-split price a little above $100 per share.
NASDAQ: NFLX
Key Data Points
But are shares attractive?
Netflix trades at about 44 times earnings and about 10 times sales, levels that sit well above many other large media and entertainment businesses. Of course, those multiples look more understandable once investors consider Netflix's rapid revenue growth rate and substantial operating margin. Yet, they also mean the market is counting on strong execution from the core business, as well as Netflix's ad tier and other growth initiatives like its live programming and games.
Traditional rivals such as Walt Disney and Comcast trade at much lower valuations. But they don't boast the same attractive growth profile -- and their streaming operations remain far less profitable than Netflix's globally scaled service. This helps explain why investors are willing to pay a significant premium for Netflix stock.
Overall, Netflix looks like a strong business at a demanding price -- a well-deserved demanding price. For that reason, I think shares look moderately attractive. But any new position in the stock should be small, as the stock's premium price means shares have valuation risk in a competitive market that includes streaming services from both traditional rivals and deep-pocketed technology giants.
