Leading global content streamer Netflix (NFLX 0.10%) dipped 4% as of 11 a.m. ET on Wednesday after the juggernaut reported mixed fourth-quarter earnings yesterday that narrowly beat estimates. While the market was hoping for blowout results, I think Netflix's earnings were excellent. Fourth quarter revenue grew 18%, remaining above the company's annualized five-year average of 14%. Earnings per share spiked 30%. Free cash flow (FCF) rose to $9.5 billion in 2025 -- compared to sales of $45 billion.
However, after management offered conservative guidance for 14% revenue growth and FCF of $6 billion in 2026, the market sent the stock slightly lower, possibly due to this softer outlook.
NASDAQ: NFLX
Key Data Points
Netflix's perfectly fine quarter
A few items from Netflix's Q4 earnings stood out to me. While global total hours viewed only rose 2% (up from 1% last year), viewing time for Netflix-branded originals rose 9%. This strong engagement with the company's own content continues to make me optimistic about the potential Warner Bros. Discovery deal, as it'd create a trove of content and brands for Netflix to reimagine.
Image source: Getty Images.
Second, management reported that advertising sales grew by over 150% in 2025, albeit off a somewhat small base, as these operations launched in late 2022. The company expects this ad revenue to double to $3 billion in 2026. If Netflix can stick the landing on building its own ad server, it could become an advertising powerhouse similar to many of its mega-cap tech peers.
Lastly, Netflix saw immense success in the world's most populous country in Q4. India was the company's second-largest contributor of paid net adds and third-largest source of percentage revenue growth. This ability to adapt to different international markets may be the most significant driver of the company's long-term growth plans.
Trading at 26 times forward earnings, following its recent 38% decline, Netflix still offers intriguing potential, in my opinion. As it leans into numerous nascent growth areas like advertising, vertical videos, live events, new geographies, gaming, podcasts, and a potential treasure trove of content from WBD, Netflix's optionality looks reasonably priced today.
