Analysis of Investments
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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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Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Netflix Inc., adjustment to net income
US$ in thousands
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).
Reported net income demonstrates a fluctuating pattern over the five-year period. Initial values decreased from 2021 to 2022, followed by increases in subsequent years, culminating in substantial growth by 2025. A consistent pattern emerges when comparing reported net income to adjusted net income.
- Net Income Trend
- Reported net income decreased from US$5,116,228 thousand in 2021 to US$4,491,924 thousand in 2022, representing a decline. Subsequent years show recovery and growth, with 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.
- Adjusted Net Income Trend
- Adjusted net income mirrors the trend of reported net income. It decreased from US$5,116,228 thousand in 2021 to US$4,491,924 thousand in 2022. It then increased to US$5,407,990 thousand in 2023, US$8,714,142 thousand in 2024, and US$10,978,690 thousand in 2025.
- Relationship Between Reported and Adjusted Net Income
- The difference between reported and adjusted net income is minimal across all periods. In 2024, adjusted net income is US$2,511 thousand higher than reported net income. In 2025, adjusted net income is US$2,511 thousand lower than reported net income. This suggests that adjustments related to mark-to-market gains or losses on available-for-sale securities have a limited impact on overall net income.
The consistent alignment between reported and adjusted net income indicates that fluctuations in available-for-sale securities do not significantly alter the overall profitability picture. The substantial growth in both reported and adjusted net income from 2023 to 2025 suggests a period of strong operational performance.
Adjusted Profitability Ratios: Mark to Market Available-for-sale Securities (Summary)
Netflix Inc., adjusted 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 reported and adjusted profitability ratios demonstrate consistent trends over the five-year period. Notably, there is no discernible difference between the reported and adjusted values for any of the ratios examined, suggesting that mark-to-market adjustments for available-for-sale securities did not materially impact reported profitability during this timeframe.
- Net Profit Margin
- The net profit margin exhibited a decline from 17.23% in 2021 to 14.21% in 2022. Following this decrease, the margin experienced a recovery, increasing to 16.04% in 2023 and continuing upward to 22.34% in 2024. This positive trend persisted into 2025, with the net profit margin reaching 24.30%. This indicates improving operational efficiency or pricing power over the latter part of the period.
- Return on Equity (ROE)
- A similar pattern is observed in the Return on Equity. ROE decreased from 32.28% in 2021 to 21.62% in 2022. Subsequently, ROE rose to 26.27% in 2023, 35.21% in 2024, and further to 41.26% in 2025. This increase suggests a more effective utilization of shareholder equity to generate profits, potentially driven by increased profitability and/or changes in financial leverage.
- Return on Assets (ROA)
- The Return on Assets mirrored the trends seen in the net profit margin and ROE. ROA declined from 11.48% in 2021 to 9.24% in 2022, before increasing to 11.10% in 2023, 16.24% in 2024, and 19.75% in 2025. This indicates improved efficiency in utilizing assets to generate earnings. The consistent upward movement in ROA from 2023 to 2025 suggests a strengthening ability to convert investments in assets into profits.
Overall, the period began with a dip in profitability, as reflected in all three ratios. However, a clear and consistent upward trend is evident from 2023 onwards, indicating a strengthening financial performance. The absence of any difference between reported and adjusted values suggests that fluctuations in the market value of available-for-sale securities did not significantly affect the overall profitability picture.
Netflix Inc., Profitability Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
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).
2025 Calculations
1 Net profit margin = 100 × Net income ÷ Revenues
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × ÷ =
The financial performance, as indicated by net profit margins, demonstrates a period of fluctuation followed by substantial improvement. Both reported and adjusted net income show a similar pattern, leading to identical trends in their respective profit margins. An initial decline is followed by consistent growth over the observed period.
- Reported Net Profit Margin
- The reported net profit margin decreased from 17.23% in 2021 to 14.21% in 2022. This represents a contraction in profitability. However, beginning in 2022, a consistent upward trend is observed, with the margin increasing to 16.04% in 2023, 22.34% in 2024, and reaching 24.30% in 2025. This indicates a significant recovery and expansion of profitability.
- Adjusted Net Profit Margin
- The adjusted net profit margin mirrors the trend of the reported net profit margin precisely. It decreased from 17.23% in 2021 to 14.21% in 2022, then increased to 16.04% in 2023, 22.34% in 2024, and ultimately reached 24.30% in 2025. The consistency between reported and adjusted figures suggests that adjustments are not materially impacting the overall profitability picture.
- Overall Trend
- The period between 2021 and 2025 shows a distinct pattern: an initial dip in profitability followed by a robust and sustained recovery. The profit margins more than offset the initial decline, achieving a higher level in 2025 than in 2021. This suggests successful implementation of strategies to improve operational efficiency or revenue generation, or a combination of both.
The consistent alignment between reported and adjusted net profit margins throughout the period suggests that any adjustments made do not fundamentally alter the underlying profitability of the business. The substantial increase in margins from 2023 to 2025 warrants further investigation to understand the drivers behind this positive performance.
Adjusted Return on Equity (ROE)
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).
2025 Calculations
1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income ÷ Stockholders’ equity
= 100 × ÷ =
The financial performance, as indicated by reported and adjusted return on equity, demonstrates a fluctuating pattern over the five-year period. While reported and adjusted net income show an overall upward trajectory, the associated ROE metrics exhibit more nuanced changes.
- Reported Return on Equity (ROE)
- Reported ROE experienced a significant decline from 32.28% in 2021 to 21.62% in 2022. A subsequent recovery was observed in 2023, with ROE reaching 26.27%. This positive trend continued into 2024 and 2025, with reported ROE increasing to 35.21% and 41.26% respectively. The latter values represent the highest ROE observed within the analyzed timeframe.
- Adjusted Return on Equity (ROE)
- The adjusted ROE mirrors the trend of the reported ROE closely. A decrease from 32.28% in 2021 to 21.62% in 2022 is evident, followed by an increase to 26.27% in 2023. Further growth is seen in 2024 (35.22%) and 2025 (41.25%), culminating in a peak similar to the reported ROE. The consistency between reported and adjusted ROE suggests that adjustments to net income have a minimal impact on the overall return metric.
- Net Income and ROE Relationship
- The decline in ROE between 2021 and 2022 coincides with a decrease in both reported and adjusted net income. Conversely, the substantial increase in ROE from 2023 through 2025 aligns with the growth in net income during those years. This correlation suggests that profitability is a primary driver of the observed ROE fluctuations.
In summary, the period began with a strong ROE, experienced a downturn, and then demonstrated a robust recovery and growth phase. The consistent movement between net income and ROE indicates a strong link between profitability and shareholder returns.
Adjusted Return on Assets (ROA)
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).
2025 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × ÷ =
The financial performance, as indicated by reported and adjusted return on assets, demonstrates a clear upward trend over the observed period. While reported and adjusted net income fluctuate, the resulting return on assets metrics exhibit consistent growth, particularly in the later years.
- Reported Return on Assets (ROA)
- Reported ROA begins at 11.48% in 2021, decreases to 9.24% in 2022, and then recovers to 11.10% in 2023. A significant increase is then observed, with ROA reaching 16.24% in 2024 and further rising to 19.75% in 2025. This suggests improving efficiency in asset utilization and profitability.
- Adjusted Return on Assets (ROA)
- The adjusted ROA mirrors the reported ROA trend precisely. It starts at 11.48% in 2021, dips to 9.24% in 2022, recovers to 11.10% in 2023, and then experiences substantial growth to 16.25% in 2024 and 19.75% in 2025. The consistency between reported and adjusted ROA indicates that adjustments to net income do not materially impact the overall assessment of asset profitability.
- Net Income Trend
- Reported net income declines from US$5,116,228 thousand in 2021 to US$4,491,924 thousand in 2022, before increasing to US$5,407,990 thousand in 2023. Further substantial growth is seen in 2024 and 2025, reaching US$8,711,631 thousand and US$10,981,201 thousand respectively. Adjusted net income follows the same pattern. The increasing net income, coupled with consistent or stable asset levels (not shown in this information), likely drives the observed ROA improvements.
- Overall Assessment
- The observed trend suggests a strengthening ability to generate earnings from its asset base. The substantial increases in ROA during 2024 and 2025 warrant further investigation to understand the underlying drivers, such as operational efficiencies, revenue growth, or changes in asset composition. The alignment of reported and adjusted ROA provides confidence in the reliability of the profitability assessment.