Netflix is the leading streaming television platform globally and enjoys the economic benefits of market-leading scale. We expect this position will persist.

Below are the key Morningstar metrics after the streaming giant delivered stellar results.

Key Morningstar metrics for Netflix

  • Fair Value Estimate: $750
  • Morningstar Rating: ★
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: High

What we thought of Netflix’s earnings

Netflix NFLX again posted fantastic results, with second-quarter sales up 16% year over year and the operating margin increasing by 7 percentage points, to 34%. However, sales would have missed guidance if not for a currency tailwind, and lower content expenses, which won’t persist, drove profits.

Why it matters: Robust sales growth is virtually certain throughout 2025. Netflix raised prices in several major markets, including the US, early in the year, and the firm is fully realizing revenue from last year’s boom in member growth, particularly in the back half. Durability is the question.

  • Second-quarter sales in the US and Canada, or UCAN, grew 16% year over year, but considering the price increases, we think the number of members has been roughly flat at best through the first half. Subscription prices in UCAN rose 10%-16% in January, depending on the plan tier.
  • If Netflix added no new UCAN members in the first half, average revenue per member would’ve been up 7% in the second quarter and slightly down in the first, plausible when factoring in plan mix and discounts. This portends poorly for 2026, after Netflix laps the price hikes.

The bottom line: We keep our $750 fair value estimate and narrow moat. We believe Netflix remains best-in-class, but we expect the rapid growth to decelerate substantially in 2026. As such, we think the stock is far too expensive, trading at 40 times FactSet consensus 2026 earnings.

  • We see room for long-term margin expansion, but the level this quarter was deceiving. Second-quarter cash content spending, which largely flows to the income statement, was down 8% year over year. This was simply a timing issue. Spending would pick up significantly in the second half.
  • Full-year operating margin guidance is now 30%, implying a 27% margin for the second half. The 1-percentage-point increase in full-year margin guidance was driven mostly by more favorable currency exchange rates, the same driver for an increase in full-year revenue guidance.

More coverage of US Reporting season:

Going into earnings, is Alphabet stock a buy, a sell, or fairly valued? With the monetisation of GenAI, here’s what we think of Alphabet’s stock

Going into earnings, Is Meta stock a buy, a sell, or fairly valued? With a focus on leveraging its AI investments, here’s what we think of Meta stock.

Other US stock ideas and coverage:

The 10 best US dividend stocks: These are the top dividend-paying stocks to buy in 2025.

James Hardie transfers of share listing to New York Stock Exchange: The change is a result of the controversial Azek acquisition.

Get Morningstar insights to your inbox

Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.

Uncertainty Rating: Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company. An investor can think of this as the underlying risk of the business. For higher risk businesses with wider ranges of potential outcomes an investor should consider a larger margin of safety or difference between the estimate of what a share is worth and how much an investor pays. This rating is used to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating is aimed at identifying the confidence we should have in assigning a fair value estimate for a stock. Read more about business risk and margin of safety here.