Netflix's Trillion-Dollar Dream: Should Investors Buy the Stock Now?

Netflix NFLX has set its sights on an ambitious target that has caught the attention of investors worldwide: doubling its revenues by 2030 and achieving a $1 trillion market capitalization. This bold declaration comes on the heels of the streaming giant's impressive first-quarter 2025 performance, which saw the company beat earnings expectations with $6.61 per share, exceeding the Zacks Consensus Estimate by 16.17% and jumping 54.8% year over year. (Read More: Netflix Q1 Earnings Beat, Revenues Rise Y/Y on Subscriber Gain).

The company has consistently outperformed market indices, with a 39.1% six-month return, significantly outpacing other streaming competitors like Apple AAPL, Amazon AMZN, and Disney DIS, as well as the broader Zacks Consumer Discretionary sector and the S&P 500. Shares of Apple, Disney and Amazon have lost 11.6%, 8.1% and 3.8%, respectively, in the same time frame.

NFLX Outperforms Sector, Competition

The Growth Strategy Behind the Trillion-Dollar Vision

Netflix's path to a trillion-dollar valuation isn't just wishful thinking — it's backed by a comprehensive growth strategy focused on four key areas. The company plans to expand its already robust content library, further develop its increasingly successful live programming options, enhance its gaming division, and build out its rapidly growing advertising business. 

NFLX’s content diversity spans genres, languages, and formats, creating multiple growth engines for the company. In the second quarter, new films include Nonnas starring Vince Vaughn, Tyler Perry's new drama Straw starring Taraji P. Henson, Bullet Train Explosion (Japan) and Havoc, an action thriller starring Tom Hardy and Forest Whitaker. New series include Forever, a modern-day take on the classic Judy Blume novel; romantic comedy The Royals (India); The Four Seasons, a comedy starring Tina Fey, Steve Carell and Colman Domingo; El Eternauta (Argentina); and Ransom Canyon, a romantic western. America’s Sweethearts: The Dallas Cowboys Cheerleaders, Black Mirror and Ginny & Georgia are all back for brand new seasons. Netflix has also slated the series finales of the Emmy Award-winning adult animated series Big Mouth and fan-favorite YOU. 

Furthermore, Netflix's live programming strategy has already delivered notable successes, including the Paul-Tyson fight, which became the most-streamed sporting event ever. The company also recently secured the U.S. rights for FIFA's Women's World Cup in 2027 and 2031, demonstrating its commitment to strategic live content acquisition rather than pursuing expensive regular-season sports packages.

Ad-Supported Tier: The Hidden Growth Accelerator

Perhaps the most promising aspect of Netflix's growth strategy is its advertising business. According to company data, more than 55% of new subscribers in markets where it's available are choosing the ad-supported option. Management projects advertising revenues reaching $9 billion annually by 2030, representing a significant new revenue stream.

The company recently launched its Ad Suite in the United States on April 1, with international expansion beginning this quarter. Management expects advertising revenues to double in 2025 alone, signaling confidence in this relatively new business segment. This diversification of revenue streams adds stability to Netflix's growth trajectory and reduces its reliance solely on subscription growth.

Financial Health Supports Long-Term Ambition

Netflix's financial position remains robust, with first-quarter 2025 revenues reaching $10.54 billion, up 12.5% year over year. The operating margin expanded impressively to 31.7%, up 370 basis points year over year. Free cash flow for the quarter was pinned at $2.66 billion compared with $1.37 billion in the previous quarter.

For the second quarter of 2025, Netflix forecasts revenues to increase 15.4% to $11.035 billion and projects an operating margin of 33%, representing a ~6 percentage point year-over-year improvement. The company maintains its full-year 2025 revenue guidance of $43.5-$44.5 billion and free cash flow forecast of approximately $8 billion.

The Zacks Consensus Estimate for NFLX’s 2025 revenues is pegged at $44.47 billion, indicating 14.01% year-over-year growth. The consensus mark for earnings is pegged at $25.33 per share, indicating a 27.74% increase from the previous year.

See the Zacks Earnings Calendar to stay ahead of market-making news.

Premium Valuation Justified by Exceptional Performance

While Netflix trades at a premium with a forward 12-month P/S ratio of 9.77 compared to the broader Zacks Broadcast Radio and Television industry's forward earnings multiple of 3.91, this valuation appears justified given the company's unique position at the intersection of technology and entertainment. Netflix's ability to outcompete both traditional media companies and tech giants speaks to its exceptional business model and execution.

NFLX’s P/S F12M Ratio Depicts Premium Valuation

Investment Opportunity in 2025

For investors, Netflix presents a compelling opportunity in 2025. NFLX's strong content lineup for 2025, including new seasons of its biggest shows like Squid Game, Wednesday and Stranger Things, positions the company for continued subscriber growth. Combined with its expanding advertising business, innovative gaming initiatives, and strategic live programming acquisitions, Netflix has multiple catalysts to drive growth toward its trillion-dollar ambition.

Investors should consider that Netflix continues to hold a leadership position in engagement (approximately two hours per paid membership per day), revenues ($39 billion), and profit ($10 billion in operating income) in a market that continues to expand. With streaming still representing less than 10% of TV hours globally, Netflix has substantial runway for growth.

For long-term investors seeking exposure to the continuing evolution of global entertainment consumption, Netflix's strategic vision and execution capabilities make it a compelling buy in 2025, despite its premium valuation. NFLX currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research