Netflix Q1 2025 Earnings Preview: The Streaming Giant at a Turning Point
In April 2025, Netflix is set to announce its crucial first-quarter earnings, which will provide a glimpse into its future growth strategy. However, this announcement marks a bold shift as the company moves away from disclosing 'subscriber numbers'—a metric long watched by the market and investors—to focus on new evaluation indicators. As the leader of the streaming industry, what path for growth is Netflix charting against the backdrop of new factors such as the expansion of its advertising business, revenue increases from price revisions, and tailwinds from foreign exchange rates? This article organizes the key points to watch in this earnings preview and delves deeper with analyst insights and market trends.
1. Non-disclosure of subscriber numbers: What the shift in metrics means
1-1. Why stop disclosing subscriber numbers?
Starting with this earnings report, Netflix will stop disclosing 'subscriber numbers' and 'Average Revenue per Member (ARM).' In response to this move, some investors have expressed concerns, asking if this is a sign that the company is hiding unfavorable information. However, Wedbush Securities analyst Alicia Reese analyzes that 'after significantly increasing subscriber numbers through the password-sharing crackdown implemented in 2024 and the introduction of ad-supported low-cost plans, Netflix's focus has shifted to quality.'
1-2. What should investors look at?
With the traditional evaluation axis of subscriber numbers gone, the following indicators will be watched more closely in the future:
Revenue growth rate (the company provided guidance of an 11% year-on-year increase for Q1)
Operating margin (a target of 29% for the full year 2025)
Expansion of free cash flow (currently at the $7 billion scale)
2. Expansion of the advertising business: A new revenue source for streaming
2-1. The rise of ad-supported plans
Netflix's ad-supported plans accounted for more than half of new subscribers in the fourth quarter of 2024. According to Melissa Otto of S&P Global Visible Alpha, 'This advertising business has a wide outlook of $3.5 billion to $17 billion by 2027, serving as a dividing line between market bulls and bears.'
2-2. Correlation with the macroeconomy
The growth of advertising revenue is also significantly linked to economic trends. It has been pointed out that if the economy slows down, advertisers may tighten their budgets, which poses a risk to Netflix's revenue.
3. Foreign exchange and tariffs: A mix of headwinds and tailwinds
3-1. The tailwind of a weaker US dollar
A weaker dollar is a tailwind for Netflix, which has a high ratio of overseas revenue. In the past, a strong dollar was a factor that pressured profits, but current exchange rate trends are highly likely to act as a positive factor.
3-2. The impact of tariffs on the media industry as a whole
According to estimates by MoffettNathanson, if tariff policies continue, they could cause up to $45 billion in losses for advertising-dependent companies such as Meta, Snap, and Roku. While Netflix's direct impact is seen as limited, attention must be paid to indirect effects, such as increased production costs and stricter restrictions on foreign content.
4. Content strategy and changes in viewing trends
4-1. Expansion into Sports and Live Streaming
Starting with its partnership with WWE (professional wrestling), Netflix is strengthening its expansion into sports content and live streaming. With an eye on acquiring F1 and other sports rights, the company aims to provide highly competitive content.
4-2. Recovery from Strikes and Quality Improvement
Although the 2023 SAG-AFTRA (actors' union) strike caused a stagnation in production across the industry, Netflix is leveraging its abundant capital to focus on strengthening its content for 2025. In fact, the company achieved a rapid subscriber increase of 15% in the first half and 16% in the second half of 2024, which is expected to have a positive impact on future retention rates.
5. Valuation Comparison and Future Stock Price Trends
5-1. Comparison with Disney
Netflix's enterprise value (EV) has reached approximately $400 billion, with a free cash flow of $7 billion. Meanwhile, Disney is valued at an EV of around $190 billion with a cash flow of $8.5 billion. In addition, Disney also operates theme parks and cruise businesses, so the difference in terms of added value cannot be ignored.
5-2. Key Points to Watch
Netflix stock has risen about 55% over the past 12 months, but the following points will be the focus of the market moving forward:
Whether revenue growth exceeds guidance
The pace of free cash flow expansion
The emergence of new 'killer content'
Expansion of the advertising business and the impact of the macro environment
This earnings announcement will not just be a report of numbers, but a venue where Netflix's growth strategy and the story it can present to investors will be tested. Having abandoned the traditional metric of subscriber numbers, Netflix has entered a stage where it measures growth through three new pillars: 'profitability,' 'retention rate,' and 'advertising scale.' This quarterly earnings report, as the first step, will truly be the 'beginning' of a turning point.
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