Netflix Beats Wall Street Forecasts, Yet Goldman Sachs Sees Limited Upside Ahead

A blockbuster quarter for Netflix Inc. (NASDAQ:NFLX) delivered standout revenue, profit, and guidance figures that blasted past Wall Street forecasts, yet Goldman Sachs is holding the line seeing little room left for further upside from current levels.

In a note shared Thursday, Goldman Sachs analyst Eric Sheridan said the market is likely to respond positively to the company's first-quarter 2025 results and its forward-looking commentary. Sheridan emphasized the "solid revenue performance," driven by rising subscriber growth and partial pricing impacts, along with a "materially better" operating margin and an aggressive stock buyback program that far exceeded prior assumptions.

Still, the investment bank is treading carefully on the streaming giant, sticking with a ‘Neutral’ rating and a 12-month price target of $955—below where the stock moved in after-hours trading following the earnings release.

Revenue Hits $10.54 Billion In Q1, Powered By Global Strength

For the quarter ended March, Netflix reported $10.54 billion in total revenue, a 13% increase year-over-year—or 16% when adjusted for foreign exchange. That result beat both Goldman Sachs' estimate of $10.42 billion and the FactSet consensus of $10.50 billion.

Regionally, performance was mixed but generally strong.

The U.S. and Canada segment pulled in $4.62 billion, slightly below Street estimates, while Europe, the Middle East and Africa (EMEA) outperformed at $3.41 billion versus expectations of $3.32 billion. Both Latin America and Asia-Pacific met or slightly beat consensus targets at $1.26 billion each.

The standout metric was Netflix's GAAP operating income, which reached $3.35 billion, well above Goldman's $2.95 billion estimate and the Street's $3 billion figure. That equated to an operating margin of 31.7%, far ahead of the 28.5% expected by Wall Street.

Earnings per share for the quarter came in at $6.61, a substantial beat compared to both Goldman's forecast of $5.60 and the consensus of $5.69.

Q2 Outlook: Strong Guidance Raises The Bar

The company guided second-quarter 2025 revenue to $11.04 billion, implying 15% year-over-year growth—again ahead of consensus expectations of $10.89 billion.

Even more compelling was the forward guidance on profitability. Netflix expects second-quarter operating income to hit $3.68 billion, reflecting an operating margin of 33.3%. That compares to Wall Street's forecast of just 30%.

If achieved, it would mark a major milestone in Netflix's margin expansion story, signaling increasing operating leverage as its global user base and pricing power grow.

Projected earnings per share for the second quarter are $7.03, topping Goldman's $6.30 and Street consensus of $6.25.

For full-year 2025, Netflix reaffirmed its guidance for revenue between $43.5 billion and $44.5 billion, and a full-year operating margin of 29%—in line with previous commentary and roughly in line with Wall Street forecasts.

Buybacks And Margins: The Two Big Stories

The company's aggressive share buyback program was a key surprise in the earnings release.

According to Sheridan, the level of shareholder returns far exceeded expectations, adding another bullish dimension to the company's capital return story.

Meanwhile, the dramatic margin expansion is central to the bull case. After spending years investing heavily in content and international growth, Netflix now appears to be reaping the rewards of scale.

Sheridan said investor debates heading into the next earnings call will center around the sustainability of these margin levels, the trajectory of Netflix's ad-supported tier and pricing strategy, and how second-half margins may compare to the strong first half.

Sheridan also flagged potential downside risks: slower-than-expected execution on initiatives like the ad-supported tier and password-sharing crackdowns, unexpected churn from pricing changes, and rising industry competition that could limit subscriber growth and margin expansion.

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