Netflix Shares Upgraded to Buy As Revenue Set To Rise

Netflix shares (NASDAQ:NFLX) have climbed more than 19% over the past month following the streaming giant’s decision to walk away from a bidding war for Warner Bros. Discovery. A fresh analyst upgrade today that highlights accelerating revenue growth that outpaces the broader media sector has also added a boost to NFLX bulls.

The Netflix stock price has rallied sharply through late February, after a difficult start to 2026, with the gains coming on the heels of Netflix’s withdrawal from the Warner Bros. Discovery acquisition process. The move, which saw Netflix decline to match a competing $31-per-share cash offer from Paramount/Skydance, was met with relief by markets concerned about potential balance sheet strain and execution risk from a transformational merger.

The positive momentum received additional support today as Erste Group upgraded Netflix to Buy from Hold, citing the company’s superior growth trajectory relative to legacy media competitors and digital entertainment peers.

Analyst Points To Revenue Acceleration

Price Targets

According to the Erste analyst report, Netflix is increasing both revenue and earnings per share “much faster than its competitors,” with expectations that the company will reach approximately $52 billion in revenue by 2026. That figure represents roughly 14% year-over-year growth from anticipated 2025 levels and would mark a meaningful acceleration from the mid-single-digit expansion rates the company posted during its 2022-2023 slowdown period.

The projection aligns with Netflix’s own guidance trajectory. The company generated approximately $39 billion in revenue during 2024 and has guided to a range of $43.5 billion to $44.5 billion for 2025, implying 11% to 13% growth. Management has discussed an internal aspiration to double revenue to roughly $80 billion by 2030, supported by continued subscriber additions, pricing optimization, and a sharp ramp in advertising revenue.

Recent quarterly results underscore the growth reacceleration. Netflix reported fourth-quarter 2025 revenue of approximately $12 billion, up 17% to 18% year-over-year, while operating margins reached 24% to 25%, slightly ahead of guidance. Paid memberships have surpassed 325 million globally, with net additions continuing to benefit from the company’s password-sharing crackdown and the rollout of advertising-supported subscription tiers.

The decision to exit the Warner Bros. Discovery bidding process represents a significant strategic pivot. Netflix had pursued the complex transaction with the aim of acquiring Warner Bros. studios, HBO and HBO Max streaming assets, DC Entertainment franchises, and related intellectual property. However, when Paramount/Skydance raised its competing bid and structured terms that WBD’s board deemed superior, Netflix management opted not to escalate.

Market commentary around the withdrawal emphasized that Netflix walked away with approximately $2.8 billion in termination compensation under the existing merger agreement, while avoiding the leverage, integration complexity, and regulatory scrutiny that would have accompanied a deal of that magnitude. The company had paused share repurchases to accumulate cash for the potential acquisition, having bought back roughly $2.1 billion of stock in the fourth quarter against an $8 billion authorization. With the transaction off the table, markets now anticipate a resumption and potential expansion of the buyback program.

Advertising and Margin Expansion

A critical element of the bull case centers on Netflix’s advertising business, which has emerged as a high-growth revenue stream. The ad-supported tier generated approximately $1.5 billion in revenue during 2025, representing growth of roughly 250% year-over-year. Management has indicated expectations for ad revenue to double again in 2026 as the company expands programmatic access, introduces new ad formats, and scales the offering across additional markets. Internal targets discussed in investor forums point to advertising revenue reaching approximately $9 billion by 2030, forming a substantial portion of the company’s plan to double total revenue over the decade.

Margin performance has also strengthened materially. Operating leverage on technology, marketing, and general administrative expenses, combined with content spending that is growing more slowly than revenue, has allowed Netflix to expand profitability even as it invests in live sports, gaming, and international content. Full-year 2024 net income reached approximately $8.7 billion, a step-change improvement from pre-2022 levels, while management has guided to roughly $8 billion in free cash flow for 2025.

The combination of revenue reacceleration and margin expansion has prompted analysts to reassess Netflix’s valuation multiple. The stock currently trades at approximately 26 times forward earnings, a level that sits near the company’s own historical range during the 2022-2023 period when growth was materially slower. Bulls argue that a mid-20s price-to-earnings ratio is reasonable, if not attractive, for a business generating mid-teens revenue growth, expanding margins, and producing substantial free cash flow with optionality in advertising, live content, and gaming.

The competitive landscape has also evolved in Netflix’s favor. Traditional media companies continue to struggle with linear television declines, weaker balance sheets, and streaming operations that remain unprofitable or marginally profitable. Pure-play digital competitors often trade at higher multiples despite slower growth or weaker unit economics. Netflix’s scale, global footprint, and operational execution have solidified its position as the clear leader in subscription streaming, with the largest paid membership base and the most robust profitability profile in the sector.

The Flip Side

Despite the turnaround, some bears remain firm in their stance. Subscriber growth in mature markets such as the United States, Canada, and parts of Western Europe is slowing, meaning incremental expansion must increasingly come from emerging markets where average revenue per user is lower, or from price increases that carry churn risk. The company’s recent growth has leaned heavily on pricing optimization and the advertising ramp, creating dependence on execution in areas where Netflix has less historical track record.

Competitive dynamics remain fluid. Rivals including Disney, Amazon, Apple, and a potentially restructured Warner Bros. Discovery under new ownership will continue to invest heavily in content and technology. The risk exists that competitors narrow the engagement gap or secure exclusive franchises that constrain Netflix’s pricing power or force higher content spending to maintain its leadership position.

Additionally, the withdrawal from the Warner Bros. Discovery transaction, while praised for capital discipline, means Netflix forgoes potential strategic assets including HBO’s premium brand, Warner Bros.’ film library and production capabilities, and DC’s superhero franchises. Some analysts view the decision as a missed opportunity to cement an unassailable content advantage and unlock cost and revenue synergies through bundling, content windowing, and intellectual property monetization across gaming and consumer products.

Today’s upgrade and the positive market reaction to the Warner Bros. Discovery withdrawal reflect growing confidence that management can deliver on that formula without taking undue balance sheet or execution risk. Yet the path to $52 billion in 2026 revenue and beyond requires flawless execution across multiple initiatives in an increasingly competitive and maturing market, leaving the stock vulnerable to any signs that growth is decelerating faster than anticipated or that profitability gains are plateauing.