Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Current Ratio since 2005
- Analysis of Debt
- Aggregate Accruals
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Profitability Ratios (Summary)
Netflix Inc., profitability ratios
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The profitability metrics demonstrate a generally positive trend over the five-year period. Initial declines in profitability from 2021 to 2022 were followed by consistent improvements through 2025. This suggests successful implementation of strategies to enhance operational efficiency and revenue generation.
- Gross Profit Margin
- The gross profit margin experienced a slight decrease from 41.64% in 2021 to 39.37% in 2022. However, it subsequently increased steadily, reaching 48.49% in 2025. This indicates improving cost management related to the production or sourcing of goods/services, or a shift towards higher-margin offerings.
- Operating Profit Margin
- Similar to the gross profit margin, the operating profit margin declined from 20.86% in 2021 to 17.82% in 2022. A recovery began in 2023, with the margin rising to 29.49% by 2025. This improvement suggests effective control of operating expenses alongside revenue growth.
- Net Profit Margin
- The net profit margin mirrored the trends observed in the gross and operating profit margins, decreasing from 17.23% in 2021 to 14.21% in 2022, then increasing to 24.30% in 2025. This indicates that improvements in core profitability are translating into higher net income.
- Return on Equity (ROE)
- Return on equity exhibited the most significant fluctuation. It decreased substantially from 32.28% in 2021 to 21.62% in 2022, before recovering strongly to 41.26% in 2025. This suggests a substantial improvement in the efficiency with which equity financing is utilized to generate profits. The increase is more pronounced than other metrics, potentially indicating changes in capital structure or share repurchases.
- Return on Assets (ROA)
- Return on assets followed a similar pattern to the other profitability ratios, declining from 11.48% in 2021 to 9.24% in 2022, and then increasing to 19.75% in 2025. This indicates improved efficiency in utilizing assets to generate earnings. The consistent upward trend from 2023 suggests effective asset management strategies.
Overall, the financial performance demonstrates a clear recovery and strengthening of profitability across all measured ratios. The consistent positive trends from 2022 to 2025 suggest a successful turnaround or strategic shift that is positively impacting financial results.
Return on Sales
Return on Investment
Gross Profit Margin
Netflix Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | ||||||
| Revenues | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
The gross profit margin exhibited fluctuations over the five-year period. Initially, a slight decrease was observed, followed by a period of consistent growth.
- Gross Profit
- Gross profit demonstrated a consistent upward trajectory throughout the period, increasing from US$12.37 billion in 2021 to US$21.91 billion in 2025. The rate of increase appeared to accelerate in later years.
- Revenues
- Revenues also increased steadily, moving from US$29.70 billion in 2021 to US$45.18 billion in 2025. Similar to gross profit, the growth rate in revenues appeared to increase from 2023 onwards.
- Gross Profit Margin
- The gross profit margin decreased from 41.64% in 2021 to 39.37% in 2022. A subsequent recovery was noted, with the margin rising to 41.54% in 2023. Further improvement was observed in 2024, reaching 46.06%, and continued into 2025, culminating in a margin of 48.49%. This indicates increasing efficiency in managing the cost of goods sold relative to revenue generation in the latter part of the period.
The correlation between increasing gross profit and revenues suggests strong revenue growth alongside effective cost management, particularly evident in the later years of the observed period. The substantial increase in the gross profit margin from 2022 to 2025 warrants further investigation to understand the underlying drivers of this improvement.
Operating Profit Margin
Netflix Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Operating income | ||||||
| Revenues | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
| Operating Profit Margin, Sector | ||||||
| Media & Entertainment | ||||||
| Operating Profit Margin, Industry | ||||||
| Communication Services | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Operating profit margin = 100 × Operating income ÷ Revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
The operating profit margin exhibited a fluctuating pattern over the five-year period. Initial observation reveals a decline followed by consistent growth.
- Operating Profit Margin - Overall Trend
- The operating profit margin began at 20.86% in 2021. A decrease was noted in 2022, falling to 17.82%. Subsequently, the margin experienced a recovery, reaching 20.62% in 2023. This upward trajectory continued, with significant increases observed in 2024 and 2025, culminating in margins of 26.71% and 29.49% respectively.
- Operating Profit Margin - 2021 to 2022
- The period between 2021 and 2022 saw a contraction in the operating profit margin. This suggests a potential increase in operating expenses relative to revenues, or a decrease in revenue growth during this time. The decline of 3.04 percentage points warrants further investigation into the underlying cost structure and revenue dynamics.
- Operating Profit Margin - 2023 to 2025
- From 2023 onwards, a clear expansion in the operating profit margin is evident. The margin increased by 8.87 percentage points over the two-year period from 2023 to 2025. This indicates improved operational efficiency, effective cost management, or a favorable shift in the revenue mix. The substantial gains in 2024 and 2025 suggest a strengthening of the company’s core profitability.
The consistent growth in operating profit margin from 2023 to 2025 is a positive indicator, demonstrating an increasing ability to convert revenue into operating profit. The initial decline in 2022, however, should be considered in conjunction with other financial metrics to understand the contributing factors.
Net Profit Margin
Netflix Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Revenues | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
| Net Profit Margin, Sector | ||||||
| Media & Entertainment | ||||||
| Net Profit Margin, Industry | ||||||
| Communication Services | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Net profit margin = 100 × Net income ÷ Revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
The net profit margin exhibited a fluctuating pattern over the five-year period. Initial observation reveals a decline followed by consistent growth.
- Net Profit Margin Trend
- In 2021, the net profit margin stood at 17.23%. A decrease was observed in 2022, with the margin falling to 14.21%. Subsequently, the margin began to recover, reaching 16.04% in 2023. This positive trend continued, with a more substantial increase to 22.34% in 2024. The most recent year, 2025, demonstrates further improvement, with the net profit margin reaching 24.30%.
The period between 2021 and 2022 indicates a potential challenge in maintaining profitability, as evidenced by the margin contraction. However, the subsequent years demonstrate a strong recovery and expansion of profitability. The consistent growth in net profit margin from 2023 to 2025 suggests improving operational efficiency, effective cost management, or increased pricing power.
- Relationship to Revenue
- While net income increased throughout the period, the rate of increase in net income accelerated in the later years, exceeding the growth rate of revenues. This disparity contributed to the observed expansion of the net profit margin. Revenues grew from US$29,697,844 thousand in 2021 to US$45,183,036 thousand in 2025, representing a significant overall increase. However, net income experienced a more pronounced growth, rising from US$5,116,228 thousand to US$10,981,201 thousand over the same timeframe.
The increasing net profit margin, coupled with revenue growth, suggests a strengthening financial performance. The company appears to be effectively converting revenue into profit, indicating positive developments in its business operations and financial strategy.
Return on Equity (ROE)
Netflix Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Stockholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
| ROE, Sector | ||||||
| Media & Entertainment | ||||||
| ROE, Industry | ||||||
| Communication Services | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
The Return on Equity (ROE) demonstrates a fluctuating pattern over the five-year period. Net income and stockholders’ equity both influence this metric, and their combined effect is reflected in the observed trends.
- Overall Trend
- The ROE experienced an initial decline followed by a substantial recovery and subsequent increase. Starting at 32.28% in 2021, the ROE decreased to 21.62% in 2022. A recovery was then observed in 2023, with the ROE rising to 26.27%. This upward momentum continued, accelerating to 35.21% in 2024 and further increasing to 41.26% in 2025.
- Net Income Influence
- Net income decreased from US$5,116,228 thousand in 2021 to US$4,491,924 thousand in 2022, contributing to the initial decline in ROE. Subsequent increases in net income, reaching US$5,407,990 thousand in 2023, US$8,711,631 thousand in 2024, and US$10,981,201 thousand in 2025, correlate with the observed increases in ROE.
- Stockholders’ Equity Influence
- Stockholders’ equity increased from US$15,849,248 thousand in 2021 to US$20,777,401 thousand in 2022. While this increase in equity partially offset the impact of declining net income on ROE in 2022, the subsequent stabilization of equity at US$20,588,313 thousand in 2023, followed by increases to US$24,743,567 thousand in 2024 and US$26,615,488 thousand in 2025, amplified the positive effect of rising net income on ROE in the later years.
The significant increase in ROE from 2023 to 2025 suggests improving profitability relative to shareholder investment. The combined effect of growing net income and increasing, though comparatively slower, stockholders’ equity has driven this positive trend.
Return on Assets (ROA)
Netflix Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
| ROA, Sector | ||||||
| Media & Entertainment | ||||||
| ROA, Industry | ||||||
| Communication Services | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
The Return on Assets (ROA) exhibited a fluctuating pattern over the five-year period. Initial observations reveal a decline followed by consistent growth.
- Overall Trend
- The ROA demonstrated an initial decrease from 11.48% in 2021 to 9.24% in 2022. Subsequently, the ROA experienced a period of sustained improvement, rising to 11.10% in 2023, 16.24% in 2024, and culminating in 19.75% in 2025. This indicates increasing efficiency in utilizing assets to generate profit.
- Year-over-Year Changes
- The largest year-over-year increase in ROA occurred between 2023 and 2024, with a change of 5.14 percentage points. The increase from 2024 to 2025 was also substantial, at 3.51 percentage points, suggesting accelerating profitability relative to asset base. The only decrease observed was between 2021 and 2022, representing a decline of 2.24 percentage points.
- Relationship to Net Income and Total Assets
- The ROA’s upward trajectory aligns with the growth in net income, particularly in the later years of the period. While total assets also increased, the rate of net income growth consistently outpaced the growth in total assets from 2022 onwards, driving the ROA higher. The relatively stable asset base between 2022 and 2023, coupled with increased net income, contributed to the ROA recovery in 2023.
In summary, the ROA indicates improving profitability and asset utilization efficiency over the analyzed period, particularly from 2023 to 2025.