Netflix (NFLX 0.27%) is one of the most disruptive and innovative companies on Earth. It identified a major opportunity. And in launching its streaming platform, it created a new category of video entertainment that has since altered the entire industry landscape. This is hard to overstate.
This streaming stock has climbed 79% in the past five years. Where will Netflix be five years from now?
Image source: Netflix.
Netflix still has growth potential
Netflix's growth has been splendid. Revenue totaled $25 billion in 2020. The company projects it to total $45.1 billion in 2025, which would translate to a 12.5% compound annual growth rate.
Management believes that in 2030, sales will be $80 billion, equating to a 12.2% yearly growth rate. It's hard to forecast the exact revenue figure that far out, but investors can be confident that the expansion will continue, even if it's at a slower clip.
Advertising is a new area of focus. Netflix introduced a cheaper ad-supported membership tier in 2022, previously positing that the business wouldn't go this route. It was a smart move. Digital ad sales are set to more than double year over year in 2025. This option had 190 million monthly active viewers in November.
While the ad sales gains will likely come down, Netflix has such a dominant position in streaming that it will keep benefiting from the heightened interest that advertisers have to target its massive user base. This will support durable revenue growth.
Netflix will also keep adding new members. It ended 2024 with 302 million subscribers (the last time data was reported). "We still got hundreds of millions of folks to sign up," co-CEO Greg Peters said on the Q1 2025 earnings call.
The company's ability to invest in the right content, while also leaning more into sports, live events, games, and podcasts, positions it well to maintain a leadership position in the world of entertainment in 2030. The pending deal to acquire certain assets of Warner Bros. Discovery is something to think about as well. Should this acquisition go through, it will meaningfully expand Netflix's film production, content catalog, and customer base.
Scale is the ultimate advantage
Building a successful streaming service obviously isn't easy. Huge investments and ongoing costs in content and tech are required. As a first mover in the industry, Netflix has reached a level of scale that is unmatched in the industry. And it's reaping the rewards.
The company reported a Q3 2025 operating margin of 28%. Exactly five years ago, that figure was 20%. The 2030 outlook called for operating income to be $30 billion that year, which would be a monster surge, translating to a forecasted margin of 37.5%.
Scale will still matter greatly if the Warner Bros. Discovery transaction ends up closing. And as is the case with deals of this magnitude, management teams tout the ability to benefit from synergies. Time will tell if this works out as expected.
NASDAQ: NFLX
Key Data Points
Competitive forces and a steep valuation are key risks
Of course, should content expenses rise dramatically, it can alter things. This leads to one of the most obvious risks to be mindful of, which is competition. When drawing the attention of viewers, Netflix has to go up against the likes of Alphabet's YouTube, Walt Disney's Disney+ and Hulu, Amazon Prime Video, and Apple TV, all of which have the financial resources to make things difficult when it comes to producing and acquiring content or sports rights to attract more viewership.
Investors also have to think about valuation. Netflix stock isn't cheap, with shares trading at a price-to-free cash flow multiple of 43.5. While this will likely be a larger business with more subscribers, revenue, and earnings in five years, I'm not sure if the stock will outperform the market. It's likely the valuation ratio will come down in the future.
