Netflix, Inc.
Communication Services · Movies & Entertainment
Structural: scaled streaming leader at ~301M paid subs, operating margin re-rated 21% → 28-30% post-2024 on paid-sharing + ads. FCF inflected: ~$7B 2024 → guide ~$8B 2025. Content amortization ~$16B/yr is the floor cost; incremental sub + ad ARPU drops to margin.
- Paid-sharing converted ~30M+ borrower households into paying accounts, still annualizing through 2026
- Ad tier >70M MAU, ARPU climbing as ad-tech stack (in-house from 2025) replaces Microsoft partnership
- Live sports beachhead ($NFL, $WWE, boxing) opens upfront ad dollars Netflix could not previously bid for
- Operating leverage: content spend held ~$17B while revenue compounds low-teens
- Pricing power demonstrated 2024-25 hikes with negligible churn spike
- Sub growth math gets harder past ~300M; ARPU + ad tier must carry the next leg
- Content amortization is real cash spent 2-3 years prior; FCF flatters GAAP earnings
- Live sports rights inflate fast - $NFL, $WWE deals reset the cost base structurally higher
- Competition from $DIS, $WBD, $AMZN, $AAPL keeps content costs bid; password-sharing one-shot is largely lapped
- Valuation: ~30x fwd P/E prices the margin re-rate; multiple compression risk on any sub deceleration
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