NFLX Financial Analysis

Analysis Date: 1/22/2025

Business Model

Netflix generates revenue primarily through paid streaming memberships across different geographic regions and plans including ad-supported and standard tiers

Revenue Sources

• Streaming subscriptions (primary revenue source)
• Advertising revenue from ad-supported tier

Revenue Distribution by Channel

• UCAN (US & Canada): $4,517M (44% of revenue)
• EMEA: $3,288M (32% of revenue)
• LATAM: $1,230M (12% of revenue)
• APAC: $1,212M (12% of revenue)

Income Statement Analysis

• Revenue grew 16% YoY driven by 15.9% growth in paid memberships and 1% growth in ARM
• Operating margin expanded to 22.2% from 16.9% YoY showing strong operating leverage
• Net income nearly doubled YoY due to strong revenue growth and margin expansion

Balance Sheet Analysis

• Strong balance sheet with $9.6B in cash and investments
• Content assets grew modestly by 2.5% YoY to $32.5B
• Stockholders equity increased 20.2% YoY despite $6.3B in share repurchases

Cash Flow Analysis

• Generated $1.4B in free cash flow despite increased content investments
• Full year 2024 free cash flow of $6.9B unchanged from 2023
• Returned $6.3B to shareholders through share repurchases in 2024

Capital Allocation

Netflix maintains a balanced capital allocation strategy focused on content investment ($18B planned for 2025), strategic investments in advertising and gaming capabilities, and returning excess cash to shareholders through share repurchases ($6.3B in 2024 with new $15B authorization)

Management Commentary

Record Q4 net additions of 19M paid memberships

Ad-supported tier gaining traction with >55% of sign-ups in ads countries

Expected to double advertising revenue again in 2025

Foreign exchange headwinds impacting 2025 revenue outlook by ~$1B

Overall Sentiment: Highly positive with strong execution across key strategic priorities and continued momentum in core business metrics

Recommendation

Rating: Buy

Reason for Rating: Strong execution, expanding margins and multiple growth vectors support continued outperformance

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/22/2025, 10:10:58 PM