Netflix Crushes Q4 Estimates, Stock Surges 10%
Streaming giant adds 12.4M subscribers and beats on revenue and EPS. Management raises 2026 guidance to $46B as live sports strategy pays off.
Netflix delivered the blowout quarter investors were hoping for.
The streaming leader reported Q4 revenue of $11.2 billion, up 15% year-over-year, with earnings per share of $4.85—well above the $4.60 analysts expected. But the subscriber number stole the show: 12.4 million net additions crushed the 9 million consensus and brought Netflix's total membership to 318 million globally.
Shares jumped nearly 10% in after-hours trading Tuesday, pushing the stock toward $1,100.
Live Sports Changes Everything
Management credited the quarter's outperformance to Netflix's expanding live sports footprint. The Christmas Day NFL games drew over 30 million concurrent viewers—a record for streaming—while WWE Raw has become appointment viewing since moving to the platform.
This isn't the Netflix of five years ago, when "live" meant nothing to a company built on binge-watching. The pivot into sports represents a fundamental shift in how Netflix thinks about engagement and advertising.
CFO Spence Neumann noted that the ad-supported tier now exceeds 200 million monthly active users. That's a massive pool for advertisers, and it's growing faster than the premium subscription base. Ad revenue remains a small fraction of total sales, but the trajectory is clear.
The 2026 Guidance
Netflix raised full-year revenue guidance to $44-46 billion, up from previous projections of $42 billion. That implies roughly 15% growth at the midpoint—not the 20%+ pace of Netflix's growth years, but remarkable for a company at this scale.
Operating margin guidance of 30-31% would mark another step up from 29% in 2025. The flywheel is working: more subscribers fund more content, which drives more subscribers, which improves unit economics.
Free cash flow is approaching $8 billion annually, supporting an aggressive $15 billion share buyback program. Netflix went from burning cash on content to generating enough to buy back 1.5% of shares outstanding each year.
What the Street Is Saying
Wall Street's reaction will play out Wednesday morning, but early read-throughs are bullish.
JPMorgan's Doug Anmuth called the results "validation of the hybrid model"—combining subscription tiers with live content to maximize both reach and revenue per user. He noted that Netflix's ad tier economics are approaching YouTube's, a comparison management would welcome.
Morgan Stanley's Ben Swinburne focused on subscriber quality. Average revenue per user rose slightly quarter-over-quarter despite the growing ad tier mix, suggesting Netflix is successfully moving users up the pricing ladder rather than cannibalizing premium subscriptions.
The bears will point to valuation. At nearly $475 billion market cap, Netflix trades at 35 times 2026 earnings estimates. That's a premium to the market and to media peers. But Netflix increasingly looks like a tech platform rather than a media company, and platforms get higher multiples.
Competitive Positioning
The results widen Netflix's lead over struggling competitors.
Disney's streaming losses are narrowing but still exist. Warner Bros. Discovery continues restructuring. Paramount is being acquired. Amazon and Apple keep investing but have different business models—Prime Video and Apple TV+ are customer acquisition tools rather than standalone profit centers.
Netflix is the only pure-play global streamer generating significant free cash flow. That's a structural advantage when building content libraries requires massive upfront investment.
The live sports strategy creates another moat. NFL and WWE rights don't come cheap, but they drive engagement that competitors can't easily replicate. Netflix's Christmas Day NFL broadcast likely cost hundreds of millions—but 30 million viewers watching simultaneously is the kind of cultural moment that keeps subscribers locked in.
What Comes Next
Q1 2026 guidance calls for 8 million net additions, which would represent normal seasonal patterns. The Street had been looking for 6-7 million, so even the guide represents an upside surprise.
Management flagged several content releases for the quarter, though they declined to provide specifics. Investors have learned to trust Netflix's content machine—the company has gotten better at predicting which shows will drive subscriber growth.
The bigger question is whether Netflix can maintain pricing power as its ad tier matures. The company has raised prices steadily over the past two years without significant churn. But there's a ceiling somewhere, and finding it could be painful.
For now, Netflix is executing. The stock's 10% pop reflects a quarter that exceeded even optimistic expectations. This was the setup we outlined Friday, and Netflix delivered beyond what most anticipated.
Investors looking for context on the broader market environment should note that Netflix reports during a volatile period for equities. Trade tensions and bond market stress may limit how far the stock can run, regardless of fundamentals.