For much of the 2010s, Netflix (NFLX 0.04%) was a classic growth stock. Its revenue and subscriber numbers were both rising quickly, and it traded at triple-digit price-to-earnings ratios.
That label may no longer apply to Netflix, though. The streaming giant is still a quality investment, but it's important to know what you're getting before you invest.
Image source: The Motley Fool.
The rapid growth stage is over
Netflix leads all streaming services in subscribers, with more than 325 million at the end of 2025. Amazon is estimated to have about 200 million users, putting it in second place, but it's not purely a streaming business.
The problem is that subscriber growth becomes more and more difficult as a platform grows. Jumping from 100 million to 300 million isn't the same as jumping from 300 million to 500 million.
Netflix has also focused on international growth, since it's already the streaming service of choice in the U.S., and it doesn't always make as much money from subscribers abroad. In low-cost-of-living countries, Netflix has to charge a much lower monthly rate, so continued expansion won't necessarily generate the same amount of revenue as before.
In terms of revenue, it reached $12.3 billion in the first quarter of 2026, a 16% year-over-year increase. Management expects full-year revenue of $50.7 billion to $51.7 billion, which would be between 12% and 14% year-over-year growth. Those are respectable numbers, but they're not the 25% to 35% growth rates shareholders used to see.
Becoming a more efficient business
Previously a company that spent heavily on content to fuel growth, Netflix is now running more efficiently. Its ad-supported tier has become a solid income stream, with ad revenue surpassing $1.5 billion in 2025. Ad-supported plans have also helped Netflix increase its membership numbers by providing a more budget-friendly option.
NASDAQ: NFLX
Key Data Points
Ads, the occasional price increase, and more controlled content spending have helped expand the streamer's margins. Operating margin was up 3 points to 29.5% in 2025, and Netflix is targeting 31.5% for 2026.
Netflix has also been generating positive cash flow for most of this decade, unlike before 2020. Free cash flow (FCF) over the trailing 12 months was $11.9 billion at the end of Q1 2026. This allows the streamer to pay for content and other expenses without taking on debt.
In between growth and value
Netflix's valuation has compressed quite a bit in recent years. It trades at 28 times trailing earnings (as of May 29), less than half its 10-year average of 60 times trailing earnings.
That kind of P/E ratio isn't exactly in value stock territory yet. In fairness, valuations have been running higher than usual lately -- for example, the Russell 1000 Value index traded at 22 times trailing earnings to start 2026.
At this point, Netflix has characteristics of growth and value stocks. It's still growing at a reasonable rate, but investors should probably expect average returns in the 10% to 15% range. It doesn't offer the same explosive upside as before, but it's safer, as it's a firmly established business with a dominant market position.
