Pricing & Ad Momentum Lift Netflix's Q4 View: Is Upside Sustainable?

Netflix's NFLX latest results underscore how pricing power and advertising momentum are fueling its next phase of growth. Following a strong third quarter, with 17% year-over-year revenue growth, the company forecast fourth-quarter 2025 revenues to rise 16.7% to $11.9 billion, driven by higher memberships, price adjustments and accelerating ad sales. Full-year revenues are expected to be $45.1 billion, suggesting a 16% year-over-year rally.

Advertising has become a key growth engine. Netflix reported its best ad-sales quarter ever, with U.S. upfront commitments more than doubling. Management reaffirmed its goal to double ad revenues in 2025, supported by its expanding ad-supported tier and the rollout of Netflix Ads Suite and Yahoo DSP integration to enhance targeting and measurement. These moves are helping transform ads into a recurring, scalable revenue stream.

Meanwhile, pricing remains a strong profit lever. Strategic hikes across premium and standard tiers in key markets such as the United States and Canada (plans now ranging from $7.99 to $24.99) have boosted average revenue per user (ARPU) and lifted the operating margin to about 28%. The dual approach of offering affordable ad-supported options, while monetizing premium users, has continued to drive revenue growth.

Looking ahead, a robust content slate is expected to sustain engagement. Fourth-quarter 2025 releases include Stranger Things’ final season, The Diplomat, and live events such as the NFL Christmas Day games and Jake Paul vs. Tank Davis fight. In 2026, global hits like Bridgerton and One Piece return, reinforcing Netflix’s content-driven growth.

The Zacks Consensus Estimate for 2025 and 2026 indicates that revenues will grow 15.6% and 12.9%, respectively, on a year-over-year basis.

How Rivals Stack Up Against NFLX in Ad & Pricing Race

The Walt Disney DIS is escalating its rivalry with Netflix by leveraging its AdTech stack across Disney+, Hulu and ESPN+ to enhance ad monetization and pricing flexibility. Disney’s shift toward ad-supported tiers boosts revenues but exposes limits in pricing power, with Disney+ ARPU stagnating around $8. Despite a strong park performance and bundling advantages, Disney faces mounting content costs that strain long-term profitability, underscoring the delicate balance between competitive pricing and sustainable growth.

Amazon AMZN is intensifying its battle with Netflix by unifying Prime Video and retail data into a powerful advertising ecosystem. With more than 130 million U.S. ad-supported viewers, Amazon leverages its massive Prime base to boost ad revenues and drive upgrades to higher-priced tiers. Projected to exceed $60 billion in 2025 retail media sales, Amazon’s data-driven targeting and integrated pricing model give it a dominant edge in streaming monetization and competitive pricing efficiency.

NFLX’s Price Performance, Valuation & Estimates

Shares of Netflix have gained 32% year to date compared with the Zacks Broadcast Radio and Television industry’s rise of 33% and the Zacks Consumer Discretionary sector’s return of 9.2%.

NFLX’s YTD Price Performance

From a valuation standpoint, Netflix appears overvalued, trading at a forward 12-month price-to-earnings ratio of 39.95, higher than the industry's 31.05X. NFLX has a Value Score of D.

NFLX’s Valuation

The consensus mark for 2025 earnings is pegged at $26.10 per share, up by a cent over the past 30 days. This indicates a 31.62% increase from the previous year's actual.

NFLX currently carries a Zacks Rank #3 (Hold). 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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