Despite cooling top-line growth, Netflix is leveraging margin improvements and a $27 billion buyback authorization to support its valuation, which now sits at a 10-year low of 23.9 times trailing earnings.
Netflix's earnings growth has been driven by margin expansion and aggressive buybacks despite slowing revenue growth, leaving the stock at the lower end of its historical valuation range.
Netflix stock has declined 35% over the past year as investors focus on slowing revenue growth. However, the company is successfully driving earnings per share through aggressive share repurchases and significant operating margin expansion, currently trading at the lower end of its historical valuation range.
Analysts are focused on slowing top-line growth, with management guiding for 11% revenue growth in Q3 2026, down from 12% in the previous quarter, alongside concerns regarding softening viewing hours per member.
Earnings growth is driven by significant operating margin expansion through disciplined content spending and a consistent reduction in share count via aggressive buybacks.