Netflix NFLX is set to release its third-quarter 2025 earnings report on Oct. 21. Here’s Morningstar’s take on what to look for in Netflix’s earnings and the outlook for its stock.

Key Morningstar metrics for Netflix

  • Morningstar Rating: ★
  • Fair Value Estimate: $750.00
  • Morningstar Uncertainty Rating: High
  • Economic Moat: Narrow

Earnings release date

  • Tuesday, Oct. 21, after the close of trading in the US

What to watch for in Netflix’s Q3 earnings

  • Looking to see which side of 15% US and Canada sales growth falls on. After first-quarter price increases and monster fourth-quarter subscriber additions last year, high growth is certain, so the 15% benchmark gives us insight into subscriber trends.
  • Monitoring the level of growth in the international regions, particularly APAC, as we think international will be imperative to keep growth high in 2026, as the United States has much less opportunity for subscriber pickups and will lap the most recent price increase.
  • Guidance last quarter implied lower margins in the second half. Given the difficulty we see in keeping up recent sales growth, greater margin expansion will be imperative to justify the current valuation, in our view.
  • Despite the stock’s price decline over the past quarter, we still see Netflix as significantly overvalued. It’s a best-in-breed company, but we don’t think its outlook for sales or profit growth justify its extraordinarily lofty multiples.

Fair Value estimate for Netflix stock

With its 1-star rating, we believe Netflix’s stock is significantly undervalued compared with our long-term fair value estimate of $750 per share, which implies a multiple of 29 times our 2025 earnings per share forecast. After considering Netflix’s opportunity to widen its member base, raise prices, and generate advertising revenue with subscribers who choose lower-priced ad-supported plans, we project about 10% average annual revenue growth over our five-year forecast, and we believe there’s room for substantial margin expansion, as international markets mature and benefit from greater scale.

Economic Moat Rating

We assign Netflix a narrow moat based on intangible assets and a network effect. Netflix has two advantages that set it apart from streaming video peers. First, it has no legacy assets that are losing value as society transitions to new ways of consuming video entertainment at home, allowing it to put its full effort behind its core streaming offering. Second, it was the pioneer in its industry, providing it a big head start in accumulating subscribers and moving past the huge initial cash burn that we see as necessary to build a successful streaming service. This subscriber base was critical in creating a virtuous cycle for Netflix that we doubt can be breached by more than a small number of competitors, which is what we think would be necessary to dampen Netflix’s ability to earn excess economic returns for the foreseeable future.

Financial strength

Netflix is in good financial shape. It ended June 2025 with a net debt/EBITDA ratio under 1.0, with the firm holding $8.3 billion in cash and $14.5 billion in total debt. More importantly, we believe the years of cash burn are behind Netflix, giving it a good cash cushion after funding its content budget. Even after funding nearly $18 billion in content costs, we expect over $9 billion in free cash flow in 2025. We expect free cash flow to grow each year throughout our forecast.

Netflix does not pay a dividend, nor do we expect it to pay one in the near future. It does have a share repurchase program, which should provide a major outlet for some cash flow. We don’t expect major acquisitions, as those have never been a part of Netflix’s strategy, but we believe it has plenty of flexibility to pursue any attractive opportunity that arises. We expect no difficulty in rolling over debt as it comes due. Almost half of Netflix’s debt matures through 2028 in similar annual increments, and another $6 billion matures over the following two years.

Risk and Uncertainty

Our Uncertainty Rating for Netflix is High, mostly based on the evolving streaming media landscape and the additional competition Netflix now faces. In our view, Netflix’s tremendous success is due largely to it being a first mover in the streaming industry and successfully adapting its business model to where the industry was going, while its media peers were largely still focusing on their legacy businesses.

The landscape has changed, as nearly every major media company is promoting its own stand-alone streaming service. Also, Netflix is more focused on profitability and cash generation that it was in its infancy, meaning prices for consumers have risen substantially over the past several years. Customers now have other choices for streaming subscriptions and the price they pay for Netflix is no longer an afterthought. As the streaming businesses of competitors mature, they may bundle their services together—with or without Netflix—or they may offer their services as add-ons for pay-TV subscribers who receive their linear channels, a foothold Netflix doesn’t currently have. These factors make it possible that Netflix will have a tougher time growing its subscriber base or generating as much revenue per subscriber.

NFLX bulls say

  • Netflix has already attracted a massive customer base and level of profitability. This advantage versus competitors makes it more likely a virtuous cycle can continue, with Netflix creating more content that attracts and holds more subscribers.
  • Advertising-supported subscriptions will open Netflix to a new base of subscribers and a major new source of revenue.
  • Netflix has significant room to grow in international markets where it has already shown promise with local content.

NFLX bears say

  • Netflix faces competition that it has not had to deal with in the past. As consumers have more options for quality streaming services, it’s more likely that Netflix could get cut out of some consumer budgets.
  • Netflix’s US business is mature, with very high penetration of total households, meaning price increases may need to be a bigger component of future growth.
  • Netflix will need to spend more on content—through sports rights and local international investment—to increase membership and prices at rates it has historically, when it worked from a lower base and with less competition.

Get Morningstar insights in your inbox