Focus On Netflix (NFLX) Revenue Growth With Potential Insulated From Direct Tariff Impact

$Netflix(NFLX)$ is scheduled to release its Q1 2025 financial results on 17 April 2025 after the market closes.

Analysts expect revenue to be around $10.5 billion, which would represent approximately 12% year-over-year growth. Netflix's own guidance was slightly lower at $10.4 billion (11.2% growth).  

The consensus estimate is around $5.67 to $5.76 per share. This indicates roughly 8-9% growth compared to Q1 2024. Notably, some analysts point out this would be the slowest EPS growth rate in several quarters. Netflix guided for $5.58 per share.

Netflix operating margin is expected to be strong, around 28.2% to 28.5%. Netflix has guided for 28.2% for the quarter and aims for 29% for the full year 2025.  

Netflix (NFLX) Last Positive Earnings Call Saw Share Price Rise 12.26%

Netflix had a positive earnings call on 21 Jan 2025 which saw its share price rise by 12.26%.

The earnings call reflects a generally positive outlook for Netflix, with strong subscriber growth, significant achievements in advertising revenue, and successful content strategies. However, challenges remain, particularly with FX volatility and increasing content spending.

Netflix (NFLX) Guidance

During Netflix's Q4 2024 earnings call, the company provided guidance on various metrics and strategic initiatives for 2025. Despite disruptions from Southern California wildfires, there was no significant impact on cash content spending for 2025. Netflix reported 19 million subscriber additions, attributing broad strength across content categories rather than any single event. The company highlighted that its advertising plan accounted for over 55% of sign-ups in ad-supported countries, achieving a 30% quarter-over-quarter increase in membership. The engagement of ad-plan members was similar to non-ad members, with ad revenue doubling year-over-year and expected to double again.

Netflix plans to spend $18 billion on content in 2025, up from $17 billion in 2024, with long-term growth opportunities and disciplined investment strategies. The company expects operating margins to benefit from high single-digit content amortization growth and strategic investments in product and engineering, particularly in ads, live events, and gaming capabilities.

Key Factors to Monitor for Netflix (NFLX) Q1 2025

Subscriber Growth and Retention

No More Subscriber Counts: This is a major shift. Starting this quarter, Netflix will stop reporting quarterly subscriber numbers.

Instead, the focus will shift to metrics like engagement (e.g., viewing hours), retention, and Average Revenue per Member (ARM) to gauge the health and monetization of the existing user base (which surpassed 300 million globally end of 2024).  

Netflix added 19 million subscribers, driven by a broad slate of content across regions, not just major events like NFL games or Jake Paul fights.

Password-sharing crackdown: Success of paid sharing initiatives in converting freeloaders to paid accounts (a major driver of 2023 growth).

Ad-supported tier adoption: Growth of the $6.99/month ad-tier plan and its contribution to revenue and margins.

Growth and adoption of the cheaper, ad-supported plan remain crucial. Reports suggest nearly half of new sign-ups are opting for this tier, contributing to user growth and offering a new revenue stream. Analysts will look for updates on its performance and contribution to overall revenue (currently estimated around 3%).  

Churn rates: Impact of competition (Disney+, Max, Amazon Prime) and price hikes on subscriber retention.

Content Pipeline and Engagement

Performance of Q1 2025 releases (original series, films, licensed content).

Franchise extensions (e.g., Stranger Things, Bridgerton, live sports experiments, or gaming initiatives). Movies like Carry-On performed well without theatrical releases, and Netflix secured rights to significant sports events like the FIFA Women's World Cup.

International content investments (e.g., non-English hits like Squid Game or Money Heist). Games like Squid Game Unleashed reached #1 in action games in app stores in 107 countries, showing positive impacts on subscriber acquisition and retention.

Performance of recent content releases and commentary on the planned $18 billion content spend for 2025. Netflix launched its own ad tech stack in Canada, showing promising revenue growth and plans to roll out in the U.S. in 2025.

Revenue and Profitability

Ads plan sign-ups represented over 55% of new memberships across ads countries in Q4. Ads revenue doubled year-over-year and is expected to double again in 2025.

Average Revenue Per User (ARPU): Impact of ad-tier adoption, regional pricing adjustments, and currency fluctuations.

Operating margins: Progress toward long-term target of 20–25% (19% in Q3 2023).

Free Cash Flow: Netflix is forecasting $8 billion in free cash flow for 2025, a significant increase from 2024, which investors will monitor closely.  Free cash flow sustainability ($5B+ expected in 2023) and capital allocation (e.g., share buybacks).

Macroeconomic and Competitive Pressures

Consumer spending trends in a potential recessionary environment (streaming as a "value" service). Content spending is set to increase from $17 billion in 2024 to $18 billion in 2025, indicating a long way to equilibrium in spending relative to revenue growth.

Competitive intensity (e.g., bundling strategies, price wars, or consolidation among rivals). The strengthening U.S. dollar impacts margin targets. 60% of revenue is in non-U.S. currencies, with only 50% hedged on a rolling 12-month basis.

Paid Sharing & Price Hikes: Assessing the ongoing impact of the password-sharing crackdown and recent price increases (like those in the US/Canada in January) on revenue growth and ARM will be important.

Netflix (NFLX) Price Target

Based on 40 Wall Street analysts offering 12 month price targets for Netflix in the last 3 months. The average price target is $1,110.00 with a high forecast of $1,494.00 and a low forecast of $833.00. The average price target represents a 13.70% change from the last price of $976.28.

Analysts are generally optimistic, with many holding 'Buy' or equivalent ratings. Firms like JPMorgan have called Netflix "resilient," citing strong engagement.  

The stock has performed very well over the past year (up ~50-60%) but has experienced some volatility recently. Options markets are implying a potential stock price move of around 9% following the earnings release.  

Technical Analysis - Exponential Moving Average (EMA)

Analysts see Netflix as relatively insulated from direct tariff impacts compared to hardware companies, though potential 'digital service taxes' internationally or a broader economic slowdown could pose indirect risks.

Looks like market is responding well to the Netflix share price as we are seeing RSI making a good momentum with potential reaching the overbought region, this normally signal a bullish reversal.

And we can see that the bulls have successfully defended the 26-EMA level and it is building a daily uptrend expansion, so I think the possibility of Netflix being insulated from the tariff impact is high.

This could mean that there might be an opportunity if the bulls can succeed in reclaiming the level, I will be thinking to add more shares when that happen.

Summary

Netflix’s Q1 2025 performance will hinge on its ability to sustain subscriber momentum post-password crackdown, monetize its ad tier, and maintain a hit-driven content slate. While the company has navigated streaming wars effectively so far, risks include saturation in core markets, rising content costs, and ad-tier monetization delays.

If Netflix can be insulated from the tariff impact, as investors we should watch for the following :

1. Watch for ad-tier revenue acceleration and margin improvements.

2. Monitor content engagement (time spent on platform vs. competitors).

3. Assess macroeconomic impacts on discretionary spending.

Appreciate if you could share your thoughts in the comment section whether you think netflix have present a good opportunity for long-term based on its ARPU Trends and Content ROI.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.