Netflix (NFLX +2.67%) operates the world's largest streaming platform for movies and television shows. Its stock peaked at around $132 last June, before embarking on a steady decline, which then accelerated when the company announced plans to acquire Warner Bros. Discovery for a whopping $82.7 billion.
Netflix stock was down by as much as 42% from its peak recently, as investors were worried about the deal's hefty price tag. However, it won't be going ahead because Warner decided to go with an offer from Paramount Skydance instead. Investors seemed pleased by this, and Netflix stock is finally on the road to recovery.
On April 16, Netflix will release its operating results for the first quarter of 2026 (ended March 31). Management's guidance points to strong revenue and earnings growth, so should investors buy the stock ahead of the upcoming report, especially while it's still down from its peak?
Image source: The Motley Fool.
Staying one step ahead of the competition
Netflix had over 325 million paying subscribers at the end of 2025. It's towering over its main rivals like Warner Bros. Discovery's HBO Max and Disney's Disney+, which have around 131 million subscribers each. Netflix continues to cement its dominance by outspending its streaming competitors when it comes to creating and licensing content, which consistently attracts new members.
However, the company also generates growth by catering to people of all economic circumstances with several membership options. It launched a subscription tier in 2022 that shows advertisements to its members in exchange for a heavily discounted price. At just $8.99 per month, it's much cheaper than Netflix's Standard ($19.99 per month) and Premium ($26.99 per month) tiers.
While the ad-supported tier nets less money upfront, each member becomes more valuable over time because Netflix can charge businesses more money for advertising slots as this subscriber base grows. Plus, the company is investing heavily in live content, which typically attracts premium ad prices. This includes weekly World Wrestling Entertainment (WWE) programming, blockbuster live boxing matches, multiple Major League Baseball (MLB) live events per year, and even live National Football League (NFL) matches.
Netflix exclusively showed both Christmas Day NFL games in 2024 and 2025, and it will do so again in 2026. But the company is also reportedly trying to win the rights to show two more games in the upcoming season, which will potentially attract both new members and new advertisers.
Netflix likely had a strong first quarter
Netflix generated a record $45.2 billion in revenue during 2025, which was up 15.8% compared to the previous year. While advertising revenue only accounted for $1.5 billion of that figure, it grew by more than 150%, and the company expects it to more than double again during 2026.
NASDAQ: NFLX
Key Data Points
The first quarter is often Netflix's weakest period of the year. The company tends to schedule some of its hardest-hitting content during the holiday season when viewers are most engaged, and many members who sign up over this period wind up cancelling their subscriptions early in the new year.
However, management's guidance suggests Netflix generated a record $12.2 billion in first-quarter revenue, representing 15.3% year-over-year growth. That would mark an acceleration from the 12.5% growth the company generated in the first quarter of 2025, highlighting the momentum in the business right now.
At the bottom line, management's guidance points to earnings of $0.76 per share, which would also be the best quarterly result in the company's history. Earnings drive a company's stock price (which I'll explore further in a moment), but record profits also give Netflix the flexibility to continue outspending its competitors to remain the industry's dominant provider.
Should you buy Netflix stock before April 16?
A single quarter is unlikely to change the strong long-term trajectory of Netflix's business, so investors shouldn't place too much weight on the April 16 report. However, its stock is sitting at an attractive valuation following its recent sell-off, so it might be a compelling buy today regardless of the upcoming earnings release.
Based on Netflix's 2025 earnings of $2.53 per share, its stock is trading at a price-to-earnings (P/E) ratio of 40.3, which is below its five-year average of 42.5. But it gets better -- Wall Street expects the company's earnings to grow to $3.17 per share in 2026, followed by $3.84 per share in 2027 (according to Yahoo! Finance), placing its stock at forward P/E ratios of 32.5 and 26.4, respectively.
Data by YCharts.
That means Netflix stock would have to soar by 52% by the end of next year just to maintain its current P/E ratio of 40.3. That is a solid potential return for investors, which might be enough reason to consider buying the stock today, irrespective of what might happen on April 16.
