Netflix (NASDAQ:NFLX) pushes toward $1,350 as ad tier explodes past 94M users and price hikes boost margin targets
Netflix (NASDAQ:NFLX) is trading just beneath $1,300, within striking distance of its $1,341.15 all-time high, as the streaming giant prepares to release Q2 earnings on July 17. The stock is up 88% over the past twelve months and has soared more than 40% year-to-date. That rally has been driven by outsized subscriber gains, effective global price adjustments, and rapid growth in the ad-supported tier. Total subscriber count has now reached 302 million worldwide, and the company’s Q1 revenue rose 12.5% to $10.54 billion. Q2 guidance calls for $11.04 billion in revenue, a 15% year-over-year gain, with operating margin expected to expand to 33%, compared to 31.7% in Q1.
Ad business grows into multibillion-dollar pillar as advertising users top 94 million
Netflix’s $7.99/month ad-supported plan has become one of the platform’s fastest-growing verticals, doubling from 40 million to 94 million active users in under a year. Management expects total advertising revenue to double in 2025 and eventually reach $9 billion annually by the end of the decade. Netflix’s rollout of an AI-powered ad tech platform—designed to improve targeting, personalization, and auction dynamics—is already supporting yield per user growth. Events like the upcoming Taylor vs. Serrano boxing match, two exclusive NFL Christmas Day games, and the weekly WWE programming slate acquired in a $500 million deal are creating high-value inventory. Netflix now has the scale and premium content to command top-tier CPMs, boosting ad monetization sharply into Q3 and Q4.
Regional revenue momentum confirms global pricing strength
Netflix posted regionally balanced growth in Q1 2025. U.S. and Canada revenue rose 9% to $4.62 billion. EMEA sales jumped 15% to $3.4 billion, while Asia-Pacific surged 23% to $1.26 billion—its strongest quarter yet. Latin America contributed $1.26 billion, growing 8%. The company continues to defy churn expectations, retaining users despite price hikes in major markets. Between Q4 2023 and Q1 2025, over 63 million new paying users were added, many of them driven by the crackdown on password sharing implemented in mid-2023. That conversion from freeloaders to paying users has become a recurring revenue engine, with price increases now fully flowing through in Q2.
AI integration lowers content costs and supports rising EBITDA margin
Netflix guided for Q2 EPS of $7.03, ahead of consensus at $6.96. In Q1, operating income climbed to $3.35 billion, up 27% year-over-year, and gross profit reached $5.28 billion. For FY 2024, Netflix reported $10.42 billion in operating profit, with gross profit margins now above 47%. The company projects $18 billion in content investment for FY 2025, but AI is now embedded across production workflows, including VFX, localization, dubbing, and editing. These efficiencies are lifting EBITDA margins, which could expand from 27.6% today to 34% by 2029 under current guidance. The internal long-term margin target has quietly shifted up to 32% on the back of these developments.
Valuation exceeds historical multiples as premium stretches beyond fair value models
Despite robust fundamentals, Netflix now trades at 50.4x forward earnings—far above the sector median of 18.6x. DCF models using a 25x exit EBITDA multiple and 8% discount rate point to a fair value near $1,213, implying 6.9% downside. GuruFocus pegs intrinsic value closer to $683.49, though this assumes normalized EBITDA and no premium for pricing power. Multiplo Invest downgraded Netflix from Buy to Hold citing stretched valuation, even as it acknowledged strong long-term margin trends. TD Cowen, however, raised its price target to $1,440 from $1,325 based on above-consensus revenue and operating income projections for Q2. The Street’s 12-month price target range spans from $726 to $1,600, with a mean estimate around $1,184.
New content slate including Squid Game, NFL, and WWE fuels ad strategy and global scale
Content remains Netflix’s core differentiator. The debut of Squid Game season 3 drew 60.1 million views within 72 hours, setting a new record for non-English content. NFL games and WWE’s 52-week slate are unlocking sports audience monetization opportunities Netflix never previously tapped. This opens the door to higher ad load tolerance and bigger brand partnerships. Beyond streaming, Netflix House—set to open in Dallas and Philadelphia in Q4—is a new physical entertainment venue offering themed experiences around Netflix IP like Stranger Things and Squid Game. This initiative adds a tangible revenue diversification layer and enhances brand loyalty in a market dominated by digital-only offerings.
Macro risks exist but Netflix’s structure buffers it from tariffs and supply shocks
Unlike traditional media conglomerates, Netflix’s digital infrastructure shields it from most macro disruptions. Even Trump’s proposed 100% tariff on foreign content is unlikely to severely impair Netflix, as it can shift production domestically or adjust licensing deals. A global slowdown could dent premium-tier subscriptions, but most churn would likely rotate into the ad-supported tier, which still monetizes effectively. Advertising budgets are vulnerable in a downturn, but Netflix’s scaled user base and premium content create a sticky platform for brand dollars.
Earnings volatility could trigger short-term pullback despite long-term stability
Netflix stock typically moves 5.2% on earnings day, with current options pricing implying a 3.6% move for July 18. At $1,276.89, any Q2 miss on margin or subscriber additions could push the stock back to $1,180–$1,200. That level would offer stronger risk-reward for long-term entry. On the upside, a beat on both ad revenue and EPS could send shares past $1,350 and toward TD Cowen’s $1,440 target. However, valuation compression risk looms large given the 50x forward multiple and sector rotation trends in H2 2025.
