Why Is Everyone Talking About Netflix?

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By Ronald Tech

Key Points

Netflix (NASDAQ: NFLX) is back in the spotlight. After years of questions about saturation and slowing growth, the streaming giant has staged a significant comeback. Investors are paying attention, not just because of its subscriber numbers but also because Netflix is reinventing how it makes money — and the results are starting to show.

Here’s why everyone is talking about Netflix today and what it means for long-term investors.

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Family members watching TV.

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Netflix’s evolving business model

Netflix still makes most of its money from subscriptions. Customers pay a monthly fee for access to its catalog of original titles, licensed content, and global hits. Globally, it has more than 300 million paid memberships in more than 190 countries.

But subscriptions are only part of the story. Particularly, two important new levers are shaping growth:

  • A cheaper, ad-supported tier that brings in price-sensitive users while opening a lucrative advertising channel
  • A password-sharing crackdown that has turned freeloaders into paying subscribers

Both levers are contributing to revenue growth and, more importantly, margin expansion. Note, though, that revenue growth is likely to be more sustainable than margin expansion in the future.

Another important aspect of this evolution is the content spending. While Netflix still spends heavily on content, it has become far more disciplined. Rather than chasing subscriber growth at any cost, management is focusing on profitability and free cash flow (FCF). For perspective, operating margin has improved from 27.2% in the second quarter of 2024 to 34.1% in Q2 2025. Similarly, FCF grew by $1.1 billion to $2.3 billion during this period.

In other words, the tech giant is evolving from a hypergrowth company to a profitable growth business engine.

Advertising: From experiment to growth driver

The most significant driver of today’s excitement is the ad-supported plan. In just two years, the product has scaled into a business of real significance.

Netflix reported that ad revenue doubled in 2024, and the company expects it to double again in 2025. The company now counts more than 94 million monthly active users on its ad-supported tier — around 30% of its 300 million-plus global subscriber base.

That adoption is not just a number. Advertisers love Netflix’s combination of premium content and engaged global audiences. The company is rolling out new ad formats, building an in-house ads suite, and signing partnerships to give marketers better targeting and measurement tools. For instance, in Q2 2025, Netflix rolled out its in-house first-party ad tech platform, Netflix Ads Suite, and integrated Yahoo DSP into its programmatic offering.

For investors, the significance is clear: Ads are no longer an experiment. They’re a scalable second engine of growth.

See also  The Rise of Taiwan Semiconductor Manufacturing Company in the AI Chipmaker World Seizing the Chipmaker Crown

As Nvidia dances on the ceiling of the trillion-dollar club, another contender emerges in the AI chipmaking realm. While Broadcom has made strides in networking and AI accelerator chips, it's not the dark horse for the trillion-dollar congregation. Eyes turn to Taiwan Semiconductor Manufacturing Company (TSMC), waiting in the wings to ascend the throne.

Image source: Getty Images.

A Mighty Player in the Shadows

TSMC reigns supreme as the largest chip fabricator globally, commanding a lion's share of foundry spending. Armed with cutting-edge chip manufacturing prowess, boasting unmatched power efficiency and computational might, TSMC etches its mark in the AI landscape and beyond.

The company's colossal scale fosters a formidable advantage over competitors. Its robust revenue streams fuel relentless investments in research and development, ensuring TSMC stands at the vanguard of chip manufacturing innovation.

Driving Growth on the Semiconductor Highway

Painting a rosy future, TSMC anticipates a fruitful trajectory in the upcoming years. With third-quarter revenue forecasts standing tall at $22.4 billion to $23.2 billion, the company flaunts remarkable year-on-year growth figures. Additionally, a projected increase in gross margin signals pricing resilience amid escalating customer demands.

Amidst the backdrop of tech giants doubling down on AI infrastructure, such as Meta Platforms and Alphabet, TSMC stands poised to ride the crest of this technological wave. With an eye on pronounced capex expansions by industry behemoths, TSMC anticipates a windfall of demand for its chipsets.

Image source: Getty Images.

An air of anticipation looms over the tech sphere as the impending Apple iPhone release promises a host of new AI features. The allure of cutting-edge technology is expected to drive a surge in iPhone upgrades, propelling a ripple effect of chip demand, with TSMC positioned at the helm of this impending surge.

The Valuation Conundrum

Despite TSMC's colossal $875 billion market capitalization, its shares appear undervalued at current prices. Trading at a modest forward price-to-earnings ratio of 26.5, coupled with robust revenue growth and margin expansion, the company is forecasted to sustain earnings growth exceeding 20% annually. Analysts project a steady trajectory of 21.5% earnings growth per annum over the ensuing five years, painting a promising picture for investors.

Avoiding the Bandwagon: An Analysis of Taiwan Semiconductor Manufacturing

Netflix’s financials justify the optimism

Netflix’s latest results underscore why the stock is drawing attention. In Q2 2025, the company posted $11.1 billion in revenue, up 16% year over year. Net income jumped 46% to $3.1 billion, while operating margin expanded to 34%, up from 27% a year earlier. Free cash flow more than doubled, reaching $2.3 billion in the quarter.

Perhaps most importantly, Netflix raised its full-year 2025 outlook. Management now expects revenue of between $44.8 billion and $45.2 billion, with operating margins approaching 30% (up from its earlier forecast of 29%). That signals confidence in both top-line growth and the underlying profitability of its model.

Netflix’s solid financial performance suggests that its strategy of running a content business alongside the ad tier is the right direction forward. More importantly, the company’s improving profitability provides it with enormous firepower to invest in future growth — particularly in creating top-quality content to delight its users.

What it means for investors

So, why is everyone talking about Netflix? Because the company has shown that it can still innovate its way forward. The ad tier is scaling quickly, and financial discipline is driving stronger margins and free cash flow.

For long-term investors, the question is no longer whether Netflix can grow. The honest debate is whether it can sustain that growth profitably in a competitive landscape. With a business model that’s evolving and results to match, Netflix has earned its place back at the center of the investing conversation.

Netflix’s mix of growth and profitability makes it one of the most compelling media stocks to watch today.

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Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.