Netflix shares edged higher in early Tuesday trading as investors looked to the streaming media group's fourth quarter earnings, and a likely boost from live sports and ad sales to its bottom line, after the close of trading.
Netflix, which last year recorded its strongest annual share gain since 2015 with an 85% increase, saw a late-December pullback tied in part to the likely impact of a stronger U.S. dollar on its near-term profit outlook.
The group generated more than half its $9.83 billion of third quarter revenue from non-U.S. markets, and a firmer dollar makes those sales less valuable when they return home and are converted into profit.
The U.S. dollar index, which tracks the greenback against a basket of its major currency peers, has risen nearly 8% since Netflix calibrated its 2025 revenue outlook of between $43 billion and $44 billion, and further gains are expected under the trade and tariff polices of President Donald Trump and a higher-for-longer inflation forecast from the Federal Reserve.
That's likely to weigh on profit into next year and could cloud the impact of a solid fourth quarter, which analysts expect included 9.2 million new subscribers and record quarterly revenue of $10.11 billion.
Live-sports boost expected in Netflix Q4 report
Netflix, which introduced an ad-based streaming tier in November 2022, is expected to have generated around $528 million in sales from the platform in the fourth quarter. Revenue is likely to pass the $2 billion mark by the end of 2025, analysts say.
Live sports has been a key component of the ad-based growth. Some 60 million viewers entered the platform to watch the Jake Paul/Mike Tyson boxing match in November and around 26.5 million joined the Christmas Day National Football League matchup between the Kansas City Chiefs and the Pittsburgh Steelers.
Related: Netflix betting millions on genius new content
"Netflix started small with originals and scaled up investment as it saw subscriber interest," said KeyBanc Capital Markets analyst Justin Patterson, who carries a $1,000 price target and overweight rating on the stock.
"With Netflix subscribers clearly interested in live content, we are curious to see which other events can be acquired at reasonable prices."
What investors won't hear, however, is any direct commentary on subscriber growth, as Netflix will no longer publish forecasts based on net additions under its new reporting structure.
Ad sales are key to Netflix's growth
That said, Wall Street estimates December-quarter additions of 9.2 million, an 80% increase from the prior period but a 32% decline from the year-earlier quarter.
At the bottom line, analysts estimate Netflix earned $4.20 a share, twice the $2.11 a share in the year-earlier quarter.
Mike Proulx, research director at Forrester, sees ad revenue overtaking subscriber gains as the key investor focus heading into 2025.
"Streaming platforms are all feverishly chasing ad dollars as an accelerator of revenue growth," said Proulx. "It’s no secret that live programming with mass audiences lures big brands to spend. In 2025, we will see more ad formats, brand partnerships, and ad tech features as Netflix looks to reach ‘critical scale.’”
Related: Netflix stock price target for 2025 gets reset after NFL Christmas games
Patterson of KeyBanc is also optimistic, adding that foreign-exchange risk to its profit outlook can be mitigated in part by its broader market leadership in the global streaming market.
"Relative to the larger ad names, Netflix also is less exposed to cyclical trends (the ad business is still being built out, and the ad-free product has pricing power), is a market leader in an industry that is consolidating, and does not face meaningful generative AI risk," he said.
Are Netflix price increases in the cards?
Another key aspect to the earnings release, and the management commentary that will follow it, will be any discussion of price increases over the coming year.
Netflix currently pegs its standard ad-supported tier at $15.49 a month, with analysts expecting a springtime boost to both widen profit margins and offset the costs linked to purchasing live-sports rights.
More Tech Stocks:
- 5 quantum computing stocks investors are targeting in 2025
- Fierce technology battle erupts within Donald Trump's fanbase
- 5 potential tech IPOs that may supercharge markets in 2025
"We acknowledge Netflix is executing significantly better than other media companies with major global scaling advantages, even if the stock appears overpriced to us in a momentum market," Benchmark analyst Matthew Harrigan said in an early January note that lifted his price target to $720 a share but maintained a 'sell' rating on the stock.
"Top line and profitability growth will increasingly depend on pricing and newer initiatives such as [advertising-based video on demand] as paid sharing benefits subside," he added.
Netflix shares were marked 0.9% higher in premarket trading to indicate an opening-bell price of $866.00 each.
Related: Veteran fund manager issues dire S&P 500 warning for 2025