The first-quarter 2026 earnings season begins this week, and as usual, Netflix (NFLX) will be among the first tech names to report on April 16. NFLX stock is up 10% so far this year and has outperformed the average S&P 500 Index ($SPX). These gains could be attributed to the company’s decision to abandon its acquisition of Warner Bros. Disovery (WBD) assets, an expensive proposition that Netflix had failed to sell to the markets.
While technology peers have taken a hit this year amid concerns about tensions in the Middle East, NFLX stock has remained relatively stable. In fact, it had the potential to outperform amid the war with Iran. In fact, NFLX stock has fared better than the broader markets over this period, although not to the extent I previously expected. Ahead of first-quarter earnings, however, Netlfix stock looks like a buy. Let’s take a closer look.
Analysts expect Netflix to post revenue of $12.17 billion in the March quarter, up more than 15% year-over-year. These estimates are in line with the guidance the company provided earlier this year when releasing fourth-quarter 2025 earnings. Analysts are also modeling EPS of 76 cents, which is similar to the company’s guidance.
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Notably, Netflix increased the prices of its streaming plans late last month. However, price increases will begin to be reflected in the company’s revenue in the coming quarters as existing members renew their subscriptions. Netflix had last raised prices in January 2025, but the increase did not cause much churn and the company added 23 million subscribers last year. While that number is below the stellar growth Netflix saw in the previous two years, that growth came thanks to the company’s crackdown on password sharing and the launch of the ad-supported low-price tier. That said, both stories have been largely fleshed out, even though Netflix has yet to release its ad-supported tier in multiple regions.
Netflix has a decent moat in an otherwise crowded streaming industry, and the company has taken advantage of that advantage to raise prices. The streamer has also been able to cajole many of its non-paying viewers who were watching content with borrowed passwords into becoming paying subscribers. Netflix appears to be a structural growth story that puts sustainable double-digit growth prospects on the table, driven by subscriber growth, higher average revenue per user (ARPU) and advertising revenue.
While Netflix may not see the kind of subscriber growth it experienced between 2023 and 2024, its paid member base should continue to grow in the single digits for the foreseeable future. ARPU should also increase due to price increases. For context, 2026 price increases are double digits across all plans except the premium plan increase of approximately 8%.
Netflix’s advertising business is also seeing strong growth, with revenue increasing more than 2.5 times to $1.5 billion last year. The company expects revenue to “roughly double” this year as it capitalizes on a growing subscription base on the ad-supported tier. According to the company’s forecasts, advertising revenue would represent less than 6% of its consolidated revenue this year, but the business is growing in triple digits.
Some simple rough calculations tell us that with these three moving parts, Netflix should be able to generate double-digit annual revenue growth even if it falters slightly on these variables.
Netflix expects margins to continue expanding each year, which is not an unreasonable expectation as it aims to keep content spending growth below revenue growth. The business also has high operating leverage, as content and technology costs are largely fixed and revenue from new entrants helps expand margins, similar characteristics to the software industry.
Sell-side analysts have become increasingly bullish on Netflix. Earlier this month, Goldman Sachs upgraded NFLX stock from “Neutral” to “Buy” and raised its price target from $100 to $120. Wedbush, HSBC, Morgan Stanley and Rosenblatt have also raised their price targets ahead of the first quarter report.
Overall, NFLX stock has a consensus rating of “Strong Buy.” Of 49 analysts with coverage, 32 have a “Strong Buy” rating, five have a “Moderate Buy” rating, and 12 analysts have a “Hold” rating. The average price target is $115.65, which represents approximately 12% upside potential from current price levels. Analysts should review their price targets after the next earnings report, and I expect most to improve their forecasts.
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Netflix trades at a forward price-to-earnings (P/E) multiple of 32.17 times, while the P/E for 2027 is approximately 27 times. These multiples seem reasonable, although not deliciously cheap. Given Netflix’s strong moat in the streaming industry, as well as structural revenue growth and margin expansion, I remain bullish on NFLX stock heading into its first-quarter earnings report.
On the date of publication, Mohit Oberoi had a position at: NFLX. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
