Netflix (NFLX) 2026 Valuation Model and Risk Framework
Netflix (NFLX) Financial Analysis includes Company Operating Model and Valuation, along with 3Q earnings recap, analysis, and discussion.
We believe that overall consolidation in the market for content will only improve Netflix's position over time regardless on whether it succeeds in acquiring Warner Brothers or not!
December's sell off provides a unique opportunity to get involved.
The most notable recent development is Netflix’s massive $82.7 billion acquisition of Warner Bros. Discovery (WBD), announced in late 2025. This deal is aimed at consolidating its lead by adding assets like HBO, Max, and the Warner Bros. film library to its ecosystem.
1. Recent Earnings & Financial Health (Full-Year 2025)
Netflix is scheduled to report its official Q4 and full-year 2025 results on January 20, 2026. Based on performance through Q3 2025:
Revenue: 2025 revenue is projected to hit roughly $43.5 – $44.5 billion, representing a healthy 13-15% year-over-year growth.
Operating Margins: The company successfully expanded margins to 29% in 2025, up from 27% in 2024, driven by its more profitable ad-supported tier.
Free Cash Flow (FCF): Netflix reported approximately $9.1 billion in FCF for the trailing twelve months, cementing its status as the only "pure-play" streamer that is consistently and highly cash-flow positive.
2. Subscriber Growth & The "Stop Reporting" Shift
In a major strategic pivot, 2025 was the final year Netflix provided quarterly subscriber updates.
Current Milestone: Netflix officially surpassed the 300 million paid member mark at the end of 2024 and entered 2026 with an estimated 310 million+ subscribers.
Growth Drivers: The 19 million net additions in late 2024 (a quarterly record) were largely fueled by the global password-sharing crackdown and the expansion of the ad-supported tier, which now accounts for over 55% of all new sign-ups.
New Metric (Engagement): Starting in 2026, management has asked investors to focus on engagement (watch time) and revenue rather than raw subscriber counts, signaling that the service is reaching maturity in developed markets like the U.S.
3. Content Provider Ranking (The "Streaming War" Standings)
Netflix continues to hold the #1 spot globally, though the competitive landscape is shifting:
| Ranking | Position | Context |
| Share | 1 | With 310M+ users, it is larger than Disney+ (~126M) and Max/WBD (~127M). |
| US Share | 2 | In the U.S., it sits at ~21% market share, slightly behind Amazon Prime Video (~22%), which benefits from Prime bundle tie-ins. |
| Viewers | 1 | In terms of actual time spent on the platform, Netflix remains the leader, often accounting for 18-20% of all TV viewing minutes in the U.S. |
| Spend | 1 | Netflix plans to spend $18 billion on content in 2025/2026, the highest "non-legacy" spend in the industry. |
The stock has recently pulled back more than 20% from its local highs as the market digests the WBD acquisition. Investors are weighing the benefits of owning HBO’s "prestige" content against the $72 billion in debt that Netflix may have to take on to finalize the deal.
Overall SSR Risk Ranking: 3 out of 5 (Moderate)
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