Netflix vs. Amazon: Which Streaming Giant Has Better Upside Potential?

The streaming wars continue to intensify as Netflix NFLX and Amazon AMZN battle for dominance in the rapidly evolving entertainment landscape. Netflix, the pioneer of streaming entertainment, commands more than 300 million paid memberships globally and has established itself as the pure-play streaming specialist. Meanwhile, Amazon leverages its vast ecosystem, encompassing cloud computing through AWS, e-commerce dominance, and Prime Video, to create a diversified technology and entertainment conglomerate. Both companies are worth comparing now as they reported strong quarterly results in 2025, yet face distinctly different opportunities and challenges.

Both companies are investing aggressively in content, advertising technology, and live programming to capture evolving consumer preferences and unlock new revenue streams in an increasingly competitive market.

Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.

The Case for NFLX Stock

Netflix's second-quarter 2025 performance demonstrated remarkable strength, with revenues reaching $11.08 billion and the company raising its full-year operating margin guidance to 30% from the previous 29%. The company's focus on disciplined content spending while maintaining subscriber growth reflects a maturing business model that prioritizes sustainable profitability over aggressive expansion.

The advertising opportunity represents Netflix's most compelling near-term growth catalyst. Management confirmed that advertising revenue is on track to roughly double in 2025, driven by the successful global rollout of its proprietary ad tech stack across all advertising markets. This technological foundation enables Netflix to offer enhanced targeting capabilities, faster feature releases, and improved measurement tools for advertisers. With the ad-supported tier priced at an accessible $7.99 monthly, Netflix has created a new customer acquisition funnel while monetizing viewers who might otherwise balk at premium pricing. 

For the 2025 holiday season and beyond, Netflix's slate includes high-profile releases like Guillermo del Toro's Frankenstein, the highly anticipated Knives Out 3 featuring Daniel Craig, the final season of Stranger Things, and premium holiday romantic comedies. The platform's ability to generate cultural phenomena and water-cooler moments strengthens subscriber loyalty and reduces churn risk.

However, Netflix faces meaningful headwinds that temper its growth outlook. The company operates as a pure-play streaming business without the diversification cushion enjoyed by competitors like Amazon or Disney. This concentrated model creates vulnerability to market saturation in developed regions and competitive pressures from well-funded rivals. Additionally, Netflix's international expansion into emerging markets presents execution risks around local content development, pricing strategies, and currency fluctuations that could impact profitability trajectories. The Zacks Consensus Estimate for 2025 earnings is pegged at $26.10 per share, indicating 31.62% growth year over year.

Netflix, Inc. Price and Consensus

Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote

The Case for AMZN Stock

Amazon's investment case rests fundamentally on its diversified business model and dominant market positions across multiple high-growth sectors. Amazon Web Services generated $30.9 billion in second-quarter revenues with 17.5% year-over-year growth, expanding to an annualized $117 billion run rate and maintaining its leadership position in cloud infrastructure. AWS represents Amazon's profit engine, generating substantially higher operating margins than the retail business while benefiting from secular tailwinds in cloud adoption and artificial intelligence workload migration. The company's commitment to investing up to $100 billion in AI infrastructure positions AWS to capitalize on enterprise demand for machine learning capabilities and generative AI solutions.

The advertising business has emerged as a significant growth driver that directly benefits Prime Video's monetization. Amazon's advertising revenues reached $13.9 billion with 19% year-over-year growth, leveraging the company's vast retail transaction data to enable premium targeting capabilities that command higher ad rates than traditional streaming platforms. Prime Video's integration across Amazon's ecosystem creates multiple content discovery touchpoints through Alexa voice assistance, Fire TV devices, and the main shopping interface, enhancing user engagement and advertiser reach. The platform's exclusive NFL Thursday Night Football programming, NASCAR coverage starting in 2025, and new NBA and WNBA deals demonstrate Amazon's commitment to live sports as a subscriber retention and advertising revenue catalyst.

Amazon's content pipeline for late 2025 and 2026 includes the highly anticipated Fallout Season 2 arriving in December 2025, the continuation of Beast Games, the holiday film Oh What Fun starring Michelle Pfeiffer, Arnold Schwarzenegger's return to holiday movies with The Man with the Bag in 2026, and Nicolas Cage's first television series, Spider-Noir. Prime members receive video streaming alongside free shipping, Prime Music, and exclusive retail discounts for a competitive monthly fee, making Prime Video effectively a bonus benefit that enhances Amazon's core retail flywheel.

Amazon's diversification provides resilience that pure-play streaming competitors cannot match. The company generated $19.2 billion in operating income during the second quarter, up 31% year over year, while guiding third-quarter revenues between $174 billion and $179.5 billion, representing 10-13% growth. This operational scale and cash flow generation capability fund continued investments in infrastructure, content acquisition, and technological innovation without the constraints facing smaller competitors. The Zacks Consensus Estimate for 2025 earnings is pegged at $6.81 per share, which indicates a jump of 23.15% from the year-ago period.

Amazon.com, Inc. Price and Consensus

Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote

Valuation and Price Performance Comparison

Amazon has returned 0.3% year to date, underperforming Netflix’s growth of 36.8% as investors digest concerns about elevated AI infrastructure spending approaching $100 billion and potential tariff impacts on retail margins. However, this relative weakness creates an attractive entry opportunity for long-term investors.

NFLX Outperforms AMZN YTD

What gives Amazon a decisive edge over Netflix, despite both having premium valuations, is the fundamental difference in business model diversification and multiple paths to value creation. Amazon's 29.43x multiple covers AWS cloud leadership, generating $117 billion annualized revenues with superior margins, a $13.9 billion advertising business growing 19% annually, a dominant e-commerce infrastructure, and Prime Video as an integrated ecosystem benefit rather than a standalone profit center. Netflix's 39.39x valuation rests entirely on streaming subscription and nascent advertising revenues, creating concentrated execution risk. Amazon's relatively lower multiple, combined with diversified revenue streams, massive free cash flow generation capability, and strategic optionality across technology and retail sectors, provides better downside protection and multiple expansion opportunities. Investors essentially pay less per dollar of earnings while gaining exposure to cloud computing, AI infrastructure, advertising, and streaming simultaneously, making Amazon's premium valuation more defensible and offering superior long-term upside despite short-term price weakness.

NFLX vs. AMZN P/E Ratio

Conclusion

While Netflix excels as a focused streaming specialist with impressive profitability and advertising momentum, Amazon holds superior upside potential for investors seeking balanced risk-reward profiles. Amazon's diversified business model, spanning AWS cloud leadership, a dominant e-commerce infrastructure, and a rapidly growing advertising platform, provides multiple growth engines and downside protection that pure-play streaming cannot match. Investors should track Amazon stock for attractive entry points due to its diversified growth drivers and more reasonable valuation, while those considering Netflix may benefit from waiting for better entry points, as the premium valuation leaves limited margin for error. NFLX and AMZN currently carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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