Netflix NFLX stock is riding high after posting impressive first-quarter results, closing at $973.03, up 2.33% for the week, and trading near its 52-week high of $1,064.50, bringing its year-to-date gain to a little over 9%. Following its earnings announcement, the streaming giant saw its shares jump more than 4% in after-hours trading.

This was followed by a rise of 3% in premarket trading on Monday as the streaming giant's upbeat annual revenue outlook reassured investors that it could withstand any economic downturn amid a tariff-laden economic climate.

The company reported first-quarter 2025 earnings of $6.61 per share, which beat the Zacks Consensus Estimate by 16.17%. The figure jumped 54.8% from the year-ago quarter.

Revenues of $10.54 billion increased 12.5% year over year or 16% on a foreign exchange (F/X) neutral basis, driven primarily by membership growth and higher pricing, partially offset by F/X, net of hedging. Revenues were modestly above guidance due to slightly higher-than-forecasted subscription and ad revenues (which is still very small relative to subscription revenues). The figure missed the consensus mark marginally by 0.04%.

The United States and Canada (UCAN) revenues grew 9% year over year compared with 15% in fourth-quarter 2024 due to only a partial quarter impact from the price change, plan mix and the absence of advertising revenues from the Christmas Day NFL games. 

See the Zacks Earnings Calendar to stay ahead of market-making news.

In a notable shift, Netflix has moved away from reporting specific subscriber counts starting with the first quarter of 2025, preferring instead to focus on financial metrics and user engagement. While tech giants like Apple AAPL and Amazon AMZN do not reveal subscriber figures for their respective streaming services, other media companies do. Disney (DIS) separately breaks out Disney+, Hulu and ESPN+ figures.

Starting with the second quarter of 2025 results, Netflix will publish its bi-annual engagement report, which accounts for 99% of all viewing on Netflix, in tandem with second and fourth-quarter earnings results. 

Solid Content Drives Subscriber Growth in Q1

Netflix delivered a solid slate in the first quarter with the streaming platform’s third most popular English language series ever named Adolescence (124 million views ), a hit limited series from the United Kingdom besides the sixth most popular English language film ever named Back in Action (146 million views) starring Cameron Diaz and Jamie Foxx, the sixth most popular non-English language film, Ad Vitam (63 million views) from France and the 10th most popular non-English language film, Counterattack (59 million views) from Mexico.

This Zacks Rank #3 (Hold) company credited first-quarter gains to the strength of its intellectual property across a variety of genres, including in the first quarter with action (The Night Agent S2, 50M views), comedy (Running Point, 36 million views; Envious S2 from Argentina, 9 million views) and true crime (American Murder: Gabby Petito, 52 million views); across languages, including German (Cassandra, 36 million views), Portuguese (Sintonia S5, 9 million views), Korean (The Trauma Code: Heroes on Call, 31 million views; When Life Gives You Tangerines, 23 million views) and Swedish (The Åre Murders, 29 million views); and across formats, such as anime (SAKAMOTO DAYS, 21 million views), animated features (Plankton: The Movie, 40 million views) and documentaries (Gone Girls: The Long Island Serial Killer, 17 million views). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NFLX also continued to test into new formats. In the first quarter, Netflix licensed four episodes of the toddler learning series Ms. Rachel (29 million views), which has consistently been in the global Top 10. The company also debuted season 2 of Inside (2 million views), a reality show from the Sidemen.

Audiences were enthralled by films and TV shows, including thrillers like Zero Day (55 million views), starring Robert De Niro; feel-good films like The Life List (67 million views), featuring rising star Sofia Carson and best-in-class reality television like Love is Blind, NFLX’s most popular dating franchise (season 8, 12 million views).

Operating Details

Marketing expenses increased 5.2% year over year to $688.4 million. As a percentage of revenues, marketing expenses contracted 50 basis points (bps) on a year-over-year basis to 6.5%.

Operating income increased 27.1% year over year to $3.34 billion. Operating margin expanded 370 bps on a year-over-year basis to 31.7%. Both were slightly above our forecast, given the revenue upside and the timing of expense spending.

Balance Sheet & Free Cash Flow

Netflix had $7.19 billion of cash and cash equivalents as of March 31, 2025, compared with $7.8  billion as of Dec. 31, 2024.

Total debt was $15.01 billion as of March 31, 2025, compared with $15.57 billion as of Dec. 31, 2024. 

Streaming content obligations were $21.79 billion as of March 31, 2025, compared with $23.24 billion as of Dec. 31, 2024.

Netflix reported a free cash flow of $2.66 billion compared with a free cash flow of $1.37 billion in the previous quarter.

During the quarter, NFLX paid down $800 million of senior notes using proceeds from 2024 refinancing and repurchased 3.7 million shares for $3.5 billion. Netflix has $13.6 billion remaining under existing share repurchase authorization.

In the second quarter, Netflix has $1 billion of debt maturities, which the company will pay down with proceeds from its investment grade bond deal last year, which are currently held in short-term investments. 

Guidance

Looking ahead, Netflix provided guidance that further excited investors. For the second quarter of 2025, NFLX forecasts revenues to increase 15.4% (+17% F/X neutral) to $11.035 billion, as the company foresees the full quarter benefit from recent price changes and continued growth in membership and advertising revenues. The company expects UCAN revenue growth to reaccelerate in the second quarter. The consensus mark for revenues is pinned at $10.96 billion.

NFLX has projected earnings of $7.03 per share. The Zacks Consensus Estimate for the same is pegged at $6.22 per share.

Netflix projects an operating margin of 33%, a ~6 percentage point year-over-year improvement. Management emphasized that operating margins should continue improving, thanks to recent price adjustments and growth in subscribers and advertising revenues. 

In the second quarter, new films include Nonnas starring Vince Vaughn, Tyler Perry's new drama Straw starring Taraji P. Henson, Bullet Train Explosion (Japan) and Havoc, an action thriller starring Tom Hardy and Forest Whitaker. New series include Forever, a modern-day take on the classic Judy Blume novel; romantic comedy The Royals (India); The Four Seasons, a comedy starring Tina Fey, Steve Carell and Colman Domingo; El Eternauta (Argentina); and Ransom Canyon, a romantic western. America’s Sweethearts: The Dallas Cowboys Cheerleaders, Black Mirror and Ginny & Georgia are all back for brand new seasons. Netflix has also slated the series finales of the Emmy Award-winning adult animated series Big Mouth, and fan-favorite YOU. 

The company recently launched its Ad Suite in the United States on April 1, with international expansion beginning this quarter. Management expects advertising revenue growth to double in 2025, signaling confidence in this relatively new business segment.

Netflix continues to forecast 2025 revenues of $43.5-$44.5 billion, which assumes healthy member growth, higher subscription pricing and a rough doubling of ad revenues, partially offset by F/X net of hedging. Netflix is still forecasting full-year 2025 free cash flow of about $8 billion.

The company is still targeting a 29% operating margin for 2025 based on F/X rates as of January 1, 2025. There has been no material change to the company’s overall business outlook since the last earnings report, although at current F/X rates (with the recent weakness of the U.S. dollar relative to most other currencies), Netflix is currently tracking above the mid-point of the 2025 revenue guidance range.  

In a bold move that captured investors’ attention, the company set an ambitious target to double its revenues by 2030 and achieve a $1 trillion market capitalization. Netflix’s growth strategy includes expanding its content library, developing live programming options, enhancing its gaming division, and building its advertising business. These strategic initiatives are expected to drive significant revenue and profit growth in the coming years.

The ad-supported subscription tier has become a significant success story for Netflix. According to company data, more than 55% of new subscribers in markets where it’s available are choosing the ad-supported option. This has led management to project advertising revenues reaching $9 billion annually by 2030, representing an increasing portion of Netflix’s total revenues.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

Netflix, Inc. (NFLX) : Free Stock Analysis Report

The Walt Disney Company (DIS) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research