NETFLIX INC

Netflix, Inc. is one of the world's leading entertainment services offering TV series, films, games and live programming across a wide variety of genres and languages. The market for entertainment video is intensely competitive and subject to rapid change, with the company competing against other entertainment video providers such as linear television, streaming entertainment providers (including those that provide pirated content), video gaming providers, open content platform providers, and more broadly against other sources of entertainment like social media. The company operates as one operating segment, with revenues primarily derived from monthly membership fees for services related to streaming content to members.

The company competes with a broad set of activities for consumers' leisure time, including other entertainment video providers such as linear television, streaming entertainment providers (including those that provide pirated content), video gaming providers, open content platform providers, and more broadly against other sources of entertainment like social media. Several competitors have long operating histories, large customer bases, strong brand recognition, exclusive rights to certain content, large content libraries, and significant financial, marketing and other resources. The company's core strategy is to grow its business globally within the parameters of its operating margin target, striving to continuously improve members' experience by offering compelling content that delights them and attracts new members.

The company's revenues are primarily derived from monthly membership fees for services related to streaming content to members. Members can play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time. The company offers a variety of streaming membership plans, the price of which varies by country and the features of the plan, including an ad-supported subscription plan. The company also earns revenue from advertisements presented on its streaming service, consumer products, live experiences and various other sources, though revenues earned from sources other than monthly membership fees were not a material component of revenues for the years ended December 31, 2025, 2024, and 2023.

As of December 31, 2025, pricing on the company's paid plans ranged from the U.S. dollar equivalent of $1 ¹ to $37 ² per month, and pricing on extra member sub accounts ranged from the U.S. dollar equivalent of $2 ³ to $9 ⁴ per month. The company's streaming revenues are reported across four regions: United States and Canada (UCAN), Europe, Middle East, and Africa (EMEA), Latin America (LATAM), and Asia-Pacific (APAC). For the year ended December 31, 2025, UCAN streaming revenues were $19,957,152 thousand ⁵, EMEA streaming revenues were $14,514,646 thousand ⁶, LATAM streaming revenues were $5,357,521 thousand ⁷, and APAC streaming revenues were $5,353,717 thousand ⁸. The company also offers games and live programming as part of its entertainment video offering.

On November 14, 2025, the company completed a ten-for-one forward stock split of its issued common stock. In the fiscal year ended December 31, 2025, the company repurchased 86,536,215 ⁹ shares of common stock for an aggregate amount of $9.1 billion ¹⁰ (excluding the 1% excise tax on stock repurchases). As of December 31, 2025, $8.0 billion ¹¹ remains available for repurchases. On December 4, 2025, the company entered into a definitive agreement and plan of merger with Warner Bros. Discovery, Inc. (WBD) to acquire WBD's streaming and studios businesses, including its film and television studios, HBO Max and HBO, for a total equity value of approximately $72.0 billion ¹² and an enterprise value of approximately $82.7 billion ¹³ (in each case, as of December 4, 2025). The company expects the WBD transaction to close in 12-18 months from December 4, 2025.

For the year ended December 31, 2025, total revenues were $45,183,036 thousand ¹⁴, an increase of 16% ¹⁵ compared to $39,000,966 thousand ¹⁶ in the prior year. Operating income was $13,326,603 thousand ¹⁷, an increase of 28% ¹⁸ compared to $10,417,614 thousand ¹⁹ in the prior year. Operating margin was 29.5% ²⁰ for the year ended December 31, 2025, compared to 26.7% ²¹ in the prior year. Net income was $10,981,201 thousand ²², an increase of 26% ²³ compared to $8,711,631 thousand ²⁴ in the prior year. Diluted earnings per share was $2.53 ²⁵ for the year ended December 31, 2025, compared to $1.98 ²⁶ in the prior year.

The company's core strategy is to grow its business globally within the parameters of its operating margin target. The company expects to continue to significantly invest in global content, particularly in original content, which will impact its liquidity. The company anticipates that it may periodically raise additional debt capital. The company expects the WBD transaction to close in 12-18 months from December 4, 2025, subject to receipt of required regulatory approvals, approval of WBD stockholders, the consummation of the separation and distribution of Discovery Global and other customary closing conditions.

The company continues to expand its offering of consumer products and live experiences to help drive growth. The company is also scaling its own studio operations to produce original content, and is developing technology and utilizing third-party 'cloud' computing, technology and other services as it scales its streaming service and introduces new features such as its ad-supported subscription plan and live programming. The company is also expanding its content and service offerings in a manner that it hopes will be well received by consumers, and is building out expertise in a number of disciplines, including creative, marketing, legal, finance, licensing, merchandising and other resources.

Operating margin for the year ended December 31, 2025 increased by approximately three percentage points as compared to the prior comparative period, primarily driven by the growth in revenues outpacing the growth in cost of revenues, sales and marketing, and general and administrative expenses. The company's cost of revenues increased 11% ²⁷ for the year ended December 31, 2025 as compared to the prior year, primarily due to a $1,121 million ²⁸ increase in content amortization and a $1,116 million ²⁹ increase in other cost of revenues, primarily driven by non-income tax assessments in Brazil. The company does not expect that non-income taxes incurred in Brazil will materially impact its results of operations in future periods.

As of December 31, 2025, the company had approximately 16,000 ³⁰ full-time employees. The company is expanding its operations, scaling its streaming service to effectively and reliably handle anticipated growth in both members and features related to its services, such as introducing games and advertising on its service, as well as offering live programming and expanding its consumer products and experiences. The company is also scaling its own studio operations to produce original content. The company relies upon Amazon Web Services to operate certain aspects of its service and any disruption of or interference with its use of the Amazon Web Services operation would impact its operations and its business would be adversely impacted.

In September 2023, the Board of Directors authorized the repurchase of up to $10 billion ³¹ of the company's common stock, with no expiration date, and in December 2024, the Board of Directors increased the share repurchase authorization by an additional $15 billion ³², also with no expiration date. As of December 31, 2025, $8.0 billion ³³ remains available for repurchases. The company has never declared or paid any cash dividends on its capital stock, and does not currently anticipate paying any cash dividends in the foreseeable future. The company anticipates that it may periodically raise additional debt capital.

Adverse macroeconomic conditions, including as a result of inflation, may adversely impact the company's ability to attract and retain members. If the company does not grow as expected, given that its content costs are largely fixed in nature, it may not be able to adjust its expenditures or increase its revenues, including by adjusting membership pricing, commensurate with the lowered growth rate such that its margins, liquidity and results of operations may be adversely impacted. The long-term and largely fixed cost nature of content commitments may limit the company's operating flexibility and could adversely affect its liquidity and results of operations.

The company is subject to economic, political, regulatory and other risks arising from its international operations, including the need to adapt content and user interfaces for specific cultural and language differences, difficulties and costs associated with staffing and managing foreign operations, political or social unrest, global hostilities, and economic instability, and compliance with laws such as the Foreign Corrupt Practices Act. Fluctuations in currency exchange rates have and may continue to impact revenues and expenses of the company's international operations and expose it to foreign currency exchange rate risk. Currencies denominated in other than the U.S. dollar accounted for 56% ³⁴ of revenue and 31% ³⁵ of operating expenses for the year ended December 31, 2025.

If the company's efforts to attract and retain members are not successful, its business will be adversely affected, as it must continually add new members both to replace canceled memberships and to grow its business beyond its current membership base. The company faces intense competition from other entertainment video providers, including linear television, streaming entertainment providers (including those that provide pirated content), video gaming providers, and open content platform providers. The long-term and largely fixed cost nature of the company's content commitments, which as of December 31, 2025 totaled $24,039,228 thousand ³⁶ in content obligations, may limit its operating flexibility and could adversely affect its liquidity and results of operations if business performance does not meet expectations. The company has a substantial amount of indebtedness, with $14.5 billion ³⁷ aggregate principal amount of senior notes outstanding as of December 31, 2025, and expects to incur and/or assume a substantial amount of additional indebtedness in connection with the WBD transaction, which could further exacerbate risks related to its ability to service its debt. The WBD transaction may not be completed on the currently contemplated timeline or terms, or at all, and if terminated under specified circumstances, a termination fee of $5.8 billion ³⁸ may be payable by Netflix to WBD.

Management's message emphasizes the company's core strategy to grow its business globally within the parameters of its operating margin target, striving to continuously improve members' experience by offering compelling content that delights them and attracts new members. The company aims to offer a range of pricing plans, including its ad-supported subscription plan, to meet a variety of consumer needs. Management seeks to drive conversation around content to further enhance member joy, and is continuously enhancing the user interface to help members more easily choose content that they will find enjoyable. The company's culture is focused on excellence and creating an environment where talented people can thrive, lifting themselves, each other and their audiences higher and higher. The company aims to attract and retain great people representing a broad array of perspectives and skills to work together as a dream team.