Netflix profit hits record $13.65B as stock sits 35% below high

Netflix's trailing-12-month net income reached a record $13.65 billion, yet shares trade 35% below their 52-week high of $126.71.

"The sell-off that got shares to where they are today was justified, but I also don't think shares are cheap enough to make them a buy," Daniel Sparks, a Motley Fool stock market analyst, said.

The record profit includes a one-time $2.8 billion pre-tax termination fee from Warner Bros. Discovery's abandoned sale of its studios and streaming business. Stripping that out, operating income over the past four quarters totals about $14.4 billion, ahead of the $13.3 billion generated in all of 2025. Second-quarter operating income rose 11% year over year to $4.2 billion.

Revenue growth has decelerated from 17.6% in the fourth quarter of 2025 to 13.4% in the second quarter, with management forecasting 11.7% growth in the third. The stock now trades at about 21 times expected 2027 earnings, down from roughly 50 times 2025 earnings at its high.

Management continues to forecast a 31.5% operating margin for 2026, expanding from 29.5% last year, implying operating income growth of more than 20% this year. For the full year, the company's revenue outlook of $51.0 billion to $51.4 billion implies 13% to 14% growth, with advertising revenue roughly doubling to about $3 billion.

At its 52-week high of $126.71, Netflix traded at about 50 times its 2025 earnings of $2.53 per share, a multiple that only made sense if mid-to-high-teens revenue growth kept compounding. Today the stock's price-to-earnings ratio is about 25 as reported, or about 31 with the one-time fee stripped out.

Sparks said the repricing reflects a maturing business rather than a market malfunction. "Now shares arguably look priced about right," he said, noting Netflix remains arguably the best-positioned company in streaming.

The decline puts Netflix's market value at about $340 billion, down from roughly $527 billion at its peak. Competition for viewing time from rivals including Disney and Warner Bros. Discovery continues to pressure subscriber growth, and management has not guided beyond 2026.

For holders, the record operating income and expanding margins show the profit engine remains intact. Investors will watch the third-quarter earnings report for whether revenue growth stabilizes near 12% and whether advertising revenue hits the roughly $3 billion target.

This article is for informational purposes only and does not constitute investment advice.