Is Netflix Stock a Buy, Sell, or Hold Heading Into 2026?

Netflix reported robust Q3 2025 revenue of $11.5 billion, marking 17.2% year-over-year growth and its fastest in four years, largely propelled by its successful advertising tier and strategic expansion into live sports content. Despite this top-line strength, the company missed earnings per share expectations, reporting $5.87 against an anticipated $6.97 due to a one-off tax dispute, which triggered an 18% stock decline from its recent high. While current valuation metrics appear elevated, projected 2026 earnings suggest a more aligned forward P/E ratio, potentially presenting a long-term investment opportunity for institutional investors.

Analysis

Netflix reported record Q3 2025 revenue of $11.5 billion, a 17.2% year-over-year increase, representing its fastest growth in four years. This strong top-line performance was coupled with an earnings per share miss, reporting $5.87 against an expected $6.97, which management attributed to a one-off tax dispute rather than operational underperformance. The stock experienced an 18% sell-off following the announcement.

Key growth drivers include the highly successful advertising subscription tier, which accounts for over half of new signups in available markets and saw advertising revenue double in 2024, projected to more than double again in 2025. The company continues to invest heavily in content, with an estimated $18 billion budget this year, strategically expanding into high-draw live sports like boxing and NFL games to attract new members.

While the current trailing P/E ratio of approximately 47 appears elevated compared to the Nasdaq-100's 33.1, analyst consensus for 2026 EPS of $32.35 suggests a more reasonable forward P/E of around 34. This projected valuation alignment, combined with consistent profitability and strategic growth initiatives, positions Netflix as a potential long-term investment opportunity.

Key Decisions for Investors

• Investors should consider the recent 18% stock decline as a potential entry point for long-term positions, given the one-off nature of the Q3 EPS miss and robust underlying revenue growth.
• Monitor the continued performance of the advertising tier and live sports content strategy as critical drivers for future subscriber and revenue expansion.
• Evaluate Netflix's valuation based on its more aligned 2026 forward P/E of approximately 34, rather than its currently elevated trailing P/E, for a clearer long-term perspective.