The emergence of generative artificial intelligence (AI) led to significant profit for the “Magnificent Seven,” a group that swiftly rose among the top-performing stocks on the market. Notably, this group comprises Meta Platforms, Apple, Amazon, Alphabet (Google’s parent company), Microsoft, Nvidia, and Tesla. These companies, with a rich background in AI technology, found themselves celebrated on Wall Street.
Over the last year, there’s been a rise in investor anticipation toward these market frontrunners. Yet, they haven’t lived up to expectations. The rapid expansion that was once seen has started to decelerate – even reversed in certain instances – causing some investors to jump ship.
Concurrently, a standout performer – initially overlooked by the group – has surpassed the achievements of each and every member in the Magnificent Seven: Netflix (NFLX). This groundbreaking streaming service has experienced an impressive 94% growth over the past year (at the time of writing), which is more than twice the earnings of the stocks belonging to the Mag Seven.
Netflix recently published its latest financial statement, aiming to widen the gap between it and its previously prominent counterparts.
By the numbers
I recently observed that Netflix outperformed predictions in all key areas during their second quarter, with a total revenue of $11.08 billion, marking a 13% increase compared to the same period last year. This substantial growth translated into a significant boost in profitability, as earnings per share (EPS) climbed an impressive 47%, reaching $7.19.
The surge in revenue can be attributed to substantial subscriber growth and a rise in digital advertising income. The increase in profits was further fueled by an expansion of operating margins that jumped 690 basis points to 34.1%. Additionally, the strategic timing of expenses played a role in this impressive profit growth.
In this scenario, the analysts’ predictions anticipated revenue of approximately $11.04 billion and earnings per share (EPS) of around $7.06. However, Netflix outperformed these expectations significantly. It is worth noting that the company has stopped disclosing subscriber numbers, a practice it ceased at the end of last year.
Management observed that Netflix had a robust year-on-year expansion in all regions, recording double-digit, foreign exchange-adjusted increases. Subscriber growth, which spiked towards the end of the quarter, surpassed Netflix’s predictions and is projected to bolster Q3 revenue. The U.S. and Canada experienced the steepest rise, with sales escalating by 15% compared to a 9% increase in the first quarter, primarily due to the latest price hike.
Netflix has now made its Netflix Ad Suite, an exclusive advertising technology platform, available in all 12 countries offering the “Netflix with Ads” subscription. This move is expected to significantly boost the company’s ad-based earnings.
A blockbuster slate
Netflix anticipates that the positive trend will persist. They are projecting a third-quarter revenue of approximately $11.5 billion, which is over 17% more than last year’s figure, and earnings per share (EPS) of $6.87, indicating a 27% growth. Additionally, the company has raised its full-year revenue expectation to $45 billion at the middle point of their guidance, an increase from the previous $44 billion. They have also boosted their projected operating margin to 29.5%, up from the earlier 29%.
The company attributes its robust present performance and increased forecast to a powerful lineup of shows, with the highly anticipated third season of “Squid Game” being a significant factor. Despite being launched towards the end of the quarter, it has already ranked as the sixth-largest series premiere in Netflix history. Standout titles from Q2 included the popular series “Sirens”, “Secrets We Keep”, and “Ginny & Georgia”, while the German film “Exterritorial” became Netflix’s fourth most-watched non-English production to date.
Among numerous notable entries, the standout was “KPop Demon Hunters,” marking one of the streamer’s most successful animated films to date. The film’s soundtrack, comprising songs from fictional bands, has been shattering K-pop records and climbed its way to become the highest-ranking soundtrack of 2025 on the Billboard 200, with an impressive seven tracks from the soundtrack making it onto the Billboard Hot 100. Furthermore, the song “Golden” soared to No. 1 on the Billboard Global Charts, earning it the title of the world’s most popular track. Consequently, these achievements solidified the movie as a global sensation.
Instead of just trusting Netflix’s claims about the quality of its content, you might want to consider their 120 Primetime Emmy nominations this week as a reliable indicator. These nominations span over 44 different titles, with notable mentions including “Adolescence”, “Black Mirror”, and “Monsters: The Lyle and Erik Menendez Story”.
The second half of the year promises an even stronger slate of programming, including:
- Stranger Things, season five
- Wednesday, season two
- Nobody Wants This, season two
- Alice in Borderland, season three
- Happy Gilmore 2
- Tyler Perry’s Madea’s Destination Wedding
- Wake Up Dead Man: A Knives Out Mystery
- Troll 2
It seems that Netflix has an impressive roster ready to take over, indicating they are well-prepared to maintain their successful streak.
Time to buy?
As an observer, it seems many investors are contemplating whether they should jump on the Netflix bandwagon now or expand their existing stake, given its impressive growth trajectory. The company’s robust pricing power, escalating ad revenue, and history of hit programming make a persuasive case for investment. However, with the stock trading at around 41 times next year’s earnings, it’s priced rather steeply, which could deter some investors. If valuation concerns are on your mind, I’d recommend waiting for price dips or employing a dollar-cost averaging strategy to gradually enter the market.
As an ardent enthusiast, I can’t help but share my excitement about Netflix! In July, a whopping 31 out of 48 analysts gave it a thumbs-up, either a ‘buy’ or ‘strong buy’, with none advising to sell. Pivotal Research, in particular, is incredibly optimistic, setting a staggering price target of $1,600 – that’s a potential return of 26% for investors! They believe Netflix still has significant room for growth globally, offering an exceptional value for entertainment dollars. It’s a compelling proposition indeed!
Given Netflix’s history of growth, I believe there’s much more to come for the streaming pioneer.
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2025-07-19 11:34