How Will Netflix Stock React To Its Upcoming Earnings?

Netflix (NASDAQ:NFLX) is set to report its Q1 2025 earnings on Thursday, April 17, 2025. Revenues are likely to grow by about 12%, per consensus estimates, to about $10.5 billion, while earnings are likely to come in at about $5.73 per share. Growth will continue to be driven by Netflix’s strong subscriber adds over the last year (over 40 million in 2024) and its recent price hikes. In January,  Netflix bumped up the price of its standard HD plan by $2.50 to $18 per month while raising the price of the Premium plan to $25 per month.

Netflix saw strong subscriber growth in 2024, driven by its password-sharing crackdown and the expansion of its ad-supported plan. However, this momentum could slow in 2025. Moreover, rising competition could lead to higher churn rates or a slowdown in new sign-ups.  The company’s decision to stop reporting subscriber numbers may suggest it anticipates a deceleration in growth this year.

We will also be closely watching Netflix’s margins for the quarter. Netflix’s content costs are set to rise as it increasingly ventures into live sports programming, such as NFL games and WWE wrestling, which are typically higher-cost businesses.

Netflix has $404 billion in current market capitalization. Revenue over the last twelve months was $39 Bil, and it was operationally profitable with $10 billion in operating profits and a net income of $8.7 Bil. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

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Netflix’s Historical Odds Of Positive Post-Earnings Return

Some observations on one-day (1D) post-earnings returns:

• There are 19 earnings data points recorded over the last five years, with 7 positive and 12 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 37% of the time.
• Notably, this percentage increases to 55% if we consider data for the last 3 years instead of 5.
• Median of the 7 positive returns = 11%, and median of the 12 negative returns = -6.7%

Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.

Correlation Between 1D, 5D, and 21D Historical Returns

A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post-earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on a 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.

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