Netflix NFLX is set to release its fourth-quarter 2026 earnings report on Jan. 20. 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 stock

  • Fair Value Estimate: $770.00
  • Morningstar Rating: ★★
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: High

Netflix earnings release date

  • Tuesday, Jan. 20, after the close of trading in the US

What to watch for in Netflix’s Q4 earnings

  • The top thing we’re looking for is 2026 guidance. Our view has been that growth is bound to slow in 2026, as the firm laps US price increases this month, with the US highly penetrated and without subscriber tailwinds. It’s possible another price hike is announced in the United States, but that’s not our expectation.
  • Considering our view that the international markets will become more important for maintaining high growth, we’ll look for their contribution to fourth-quarter results.
  • Any commentary on the plans for Warner Bros. Discovery WBD will be important, as we think the announced acquisition was a catalyst in driving the stock down in the past couple of months.
  • For the first time in a very long time, Netflix doesn’t look grossly overvalued. It’s stock is still above our fair value estimate, but there’s currently a path for the current valuation to look reasonable, and it’s conceivable that it could look like an opportunity for investors in the wake of the earnings announcement.

Fair Value Estimate for Netflix stock

With its 2-star rating, we believe Netflix’s stock is moderately overvalued compared with our long-term fair value estimate of $770, which implies a multiple of 25 times our 2026 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.

We expect member growth to come mostly from international markets over the long term. After a jump in household penetration that began in 2023, which we attribute mostly to the crackdown on password sharing and ad-supported subscription alternatives, we expect new member growth in the US and Canada to slow significantly in 2025. Over our forecast, we project UCAN member growth of only about 2% annually, only marginally exceeding the rate we expect for household formation. We project UCAN average revenue per member, or ARM, to rise at a mid-single-digit rate each year. We expect the firm to continue raising prices at least every two years, but we also expect a material bump from advertising revenue. Netflix began selling ad-supported subscriptions in 2022, but it has not yet reached its potential on selling ads within that service, leaving room for upside. However, the opportunity is mitigated by a mix shift in the subscriber base to lower-priced ad-supported plans. Considering all the puts and takes, we forecast a compound annual revenue growth rate in UCAN of 8.5% through 2030 and about 7% through 2034.

Economic Moat Rating

We assign Netflix a narrow moat rating based on intangible assets. 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 attained 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 September 2025 with a net debt/EBITDA ratio under 1.0, with the firm holding $9.3 billion in cash and $14.5 billion in total debt. More importantly, the years of cash burn are long behind Netflix, giving the firm a good cash cushion after funding its content budget. Even after funding nearly $18 billion in content costs, we expect $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 in place, 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. Our rating is largely based upon 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 now 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.

From an ESG perspective, we believe potential social issues could carry the greatest risk. The entertainment industry in general has a history of bad behavior regarding issues like sexual assault and harassment and racial and gender discrimination.

NFLX bulls say

  • Netflix has already attracted a massive customer base and level of profitability. This advantage makes it more likely a virtuous cycle can continue, with the firm securing 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.

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