Netflix Inc. (NASDAQ:NFLX)

The financial performance, as indicated by the presented metrics, demonstrates a notable evolution over the observed period. Return on Equity (ROE) initially experienced a decline from early 2022 through the first half of 2023, followed by a period of substantial improvement and continued growth through early 2025. This ROE trajectory is closely linked to the interplay between Return on Assets (ROA) and Financial Leverage.

Return on Assets (ROA)

ROA exhibited a consistent downward trend from March 31, 2022 (11.05%) to March 31, 2023 (8.49%). However, beginning in the latter half of 2023, ROA began a strong upward climb, reaching 19.75% by December 31, 2025. This suggests increasing efficiency in asset utilization and profitability. The most significant gains in ROA occurred between December 2023 and March 2025.

Financial Leverage

Financial Leverage remained relatively stable between March 31, 2022 (2.58) and June 30, 2023 (2.23), showing a gradual decrease. A slight increase was observed in the latter half of 2023, peaking at 2.37 by December 31, 2023. Subsequently, leverage continued to decline, reaching 2.09 by December 31, 2025. This indicates a decreasing reliance on debt financing relative to equity.

Return on Equity (ROE) – Two-Component Analysis

The initial decline in ROE from 2022 to mid-2023 was primarily driven by the decrease in ROA, despite a relatively stable Financial Leverage. The subsequent recovery and growth in ROE from late 2023 through 2025 are attributable to the combined effect of increasing ROA and a stabilization, followed by a slight decrease, in Financial Leverage. The substantial ROE increase observed in the latter part of the period suggests that improvements in asset utilization are having a significant positive impact on shareholder returns, even with a moderate reduction in financial risk as indicated by the declining leverage ratio.

In summary, the observed trends indicate a period of operational improvement and increasing profitability, as evidenced by the rising ROA. While financial leverage has decreased slightly, its impact on ROE has been offset by the gains in asset efficiency. The overall trend points towards a strengthening financial position and improved returns for equity holders.

The three-component DuPont analysis reveals a dynamic shift in the company’s Return on Equity (ROE) over the observed period. Initially, ROE experienced a decline from 28.54% in March 2022 to 18.60% in June 2023. However, a subsequent recovery and sustained growth in ROE is evident, culminating in 41.26% by December 2025. This overall trajectory is attributable to the interplay of Net Profit Margin, Asset Turnover, and Financial Leverage.

Net Profit Margin

The Net Profit Margin demonstrates a consistent upward trend, increasing from 16.47% in March 2022 to 24.30% in December 2025. This indicates improving profitability, with the company generating a greater percentage of revenue as net income. The most significant gains occurred between December 2023 and December 2025, suggesting successful implementation of cost control measures or pricing strategies.

Asset Turnover

Asset Turnover exhibits a more moderate pattern. It initially decreased from 0.67 in March 2022 to 0.63 in June 2023, indicating a slight decrease in efficiency in utilizing assets to generate sales. However, the ratio then began to increase, reaching 0.81 by December 2025. This suggests improved asset management and increased sales generation per dollar of assets, contributing positively to ROE in the later periods.

Financial Leverage

Financial Leverage generally decreased from 2.58 in March 2022 to a low of 2.09 in December 2025. This signifies a reduction in the company’s reliance on debt financing. While lower leverage reduces financial risk, it also diminishes the magnification effect on ROE. The initial decline in ROE from March 2022 to June 2023 coincided with a decrease in financial leverage, partially explaining the ROE reduction.

The recovery and subsequent growth in ROE from September 2023 onwards are primarily driven by the substantial increase in Net Profit Margin, with a supporting contribution from the improving Asset Turnover. The decreasing Financial Leverage, while prudent from a risk management perspective, partially offset the positive impact of the other two components. The combined effect demonstrates a shift towards more profitable and efficient operations, ultimately leading to a significantly higher ROE by the end of the analyzed period.

The interplay between these three components highlights a strategic evolution. The company appears to have prioritized profitability and asset utilization, resulting in a substantial improvement in shareholder returns despite a more conservative approach to financial leverage.

The five-component DuPont analysis reveals a dynamic shift in performance over the observed period. Initially, a decline in Return on Equity (ROE) is evident, followed by a substantial recovery and subsequent stabilization at a higher level. This fluctuation is driven by changes across the components of the analysis, particularly the EBIT Margin, Asset Turnover, and Financial Leverage.

Tax Burden

The Tax Burden demonstrates relative stability, fluctuating within a narrow range between 0.85 and 0.89 throughout the period. A slight downward trend is observed in the latter half of the period, but the impact appears minimal. This suggests consistent tax management practices.

Interest Burden

The Interest Burden exhibits a gradual increase from 0.88 to 0.94. This indicates a rising proportion of earnings allocated to interest expenses, potentially due to increased debt levels or changes in interest rates. The increase is consistent and appears to accelerate slightly towards the end of the observed timeframe.

EBIT Margin

The EBIT Margin experienced a notable decline from 21.52% to 17.07% before undergoing a significant recovery. From March 31, 2023, the margin consistently increased, reaching 29.88% by December 31, 2025. This improvement is the primary driver of the overall ROE increase, demonstrating enhanced operational profitability. The rate of increase appears to be slowing in the most recent periods.

Asset Turnover

Asset Turnover initially decreased from 0.67 to a low of 0.63, indicating a less efficient utilization of assets. However, it subsequently improved, peaking at 0.81 by December 31, 2025. This suggests improved efficiency in generating sales from its asset base, contributing positively to ROE. The improvement in asset turnover is less pronounced than the improvement in EBIT margin.

Financial Leverage

Financial Leverage decreased from 2.58 to 2.09 over the period. This indicates a reduction in the proportion of assets financed by debt. While lower leverage generally reduces risk, the decrease also partially offsets the positive impact of the improved EBIT Margin and Asset Turnover on ROE. The rate of decline in financial leverage appears to be slowing.

The initial decline in ROE was primarily attributable to the decreasing EBIT Margin and Asset Turnover, partially offset by the relatively stable Tax Burden and Financial Leverage. The subsequent recovery in ROE is largely driven by the substantial improvement in the EBIT Margin, with contributions from the increasing Asset Turnover. The decreasing Financial Leverage, while prudent from a risk management perspective, dampened the overall ROE increase. The interplay of these components demonstrates a strategic shift towards improved profitability and asset utilization.

The financial performance, as indicated by the two-component disaggregation of Return on Assets (ROA), demonstrates a clear upward trend over the analyzed period. This improvement is driven by concurrent increases in both Net Profit Margin and Asset Turnover. Initial observations reveal a period of relative stability followed by accelerating gains in profitability and efficiency.

Net Profit Margin

The Net Profit Margin exhibits a consistent upward trajectory. Beginning at 16.47% in March 2022, it experiences a slight decline through December 2022, reaching 14.21%. However, a robust recovery begins in March 2023, and the margin continues to increase steadily, culminating in 24.30% by December 2025. This indicates a strengthening ability to translate revenue into profit. The most significant gains are observed between March 2024 and June 2025.

Asset Turnover

Asset Turnover shows a more moderate, but still positive, trend. Starting at 0.67 in March 2022, it remains relatively stable for the first three quarters before experiencing a gradual decline to 0.63 in June 2023. From September 2023 onward, the ratio consistently increases, reaching 0.81 by December 2025. This suggests improving efficiency in utilizing assets to generate sales. The rate of increase is more pronounced in the latter half of the analyzed period.

Return on Assets (ROA)

The Return on Assets mirrors the positive trends in its component ratios. Starting at 11.05% in March 2022, ROA declines to 8.49% by March 2023, reflecting the temporary dip in both margin and turnover. A consistent upward trend then emerges, accelerating from September 2023, and reaching 19.75% by December 2025. This substantial increase demonstrates a significant improvement in overall asset profitability. The correlation between ROA and the individual components is strong, confirming their combined influence.

In summary, the analyzed period reveals a positive shift in financial performance. The increasing Net Profit Margin and Asset Turnover have collectively driven a substantial improvement in Return on Assets. The latter half of the period, particularly from September 2023 onwards, demonstrates the most significant gains, suggesting successful strategic initiatives or favorable market conditions.

The financial performance, as disaggregated through a four-component DuPont analysis, reveals a generally improving trend in Return on Assets (ROA) over the observed period. This improvement is driven by a combination of factors, notably increasing EBIT margin and asset turnover, partially offset by changes in tax and interest burdens. A detailed examination of each component follows.

Tax Burden

The tax burden exhibits relative stability, fluctuating within a narrow range between 0.85 and 0.89 throughout the period. A slight downward trend is discernible in the latter half of the observation window, decreasing from 0.89 in September 2023 to 0.86 in December 2025. This suggests a marginally decreasing effective tax rate, though the overall impact appears limited.

Interest Burden

The interest burden demonstrates a consistent upward trend. Starting at 0.88 in March 2022, it gradually increases to 0.94 by March 2025 and remains at that level through December 2025. This indicates a growing proportion of earnings allocated to interest expense, potentially due to increased debt levels or rising interest rates. The increasing interest burden exerts downward pressure on ROA.

EBIT Margin

The EBIT margin shows a significant and consistent improvement over the period. Beginning at 21.52% in March 2022, it experiences an initial decline to 18.88% by December 2022. However, it then embarks on a strong upward trajectory, reaching 29.88% by December 2025. This substantial increase in profitability is the primary driver of the overall ROA improvement. The rate of increase accelerates in the latter half of the period.

Asset Turnover

Asset turnover also exhibits an improving trend, though less pronounced than the EBIT margin. It declines initially from 0.67 in March 2022 to 0.63 in June 2023, but then steadily increases, reaching 0.81 by December 2025. This suggests increasing efficiency in utilizing assets to generate revenue. The improvement in asset turnover contributes positively to ROA.

The combined effect of these components results in a notable increase in ROA. Starting at 11.05% in March 2022, ROA declines to 8.36% in June 2023, mirroring the initial dip in EBIT margin. However, subsequent improvements in both EBIT margin and asset turnover drive ROA upwards, culminating in 19.75% by December 2025. The increasing interest burden partially mitigates the positive impact of the other components, but the overall trend remains strongly positive.

In summary, the observed performance is characterized by robust profitability gains and improved asset utilization, leading to a substantial increase in ROA. The rising interest burden warrants continued monitoring, but the overall financial trajectory appears favorable.

The information presents a quarterly view of several profitability ratios over a three-year period. A consistent trend of increasing profitability is observed, particularly in the latter half of the analyzed timeframe. The analysis focuses on the relationship between tax burden, interest burden, EBIT margin, and net profit margin to understand the drivers of this trend.

Tax Burden

The tax burden exhibits relative stability, fluctuating between 0.85 and 0.89 throughout the period. Minor variations are present, but no significant upward or downward trend is discernible. This suggests consistent tax planning or a stable tax environment for the company.

Interest Burden

The interest burden demonstrates a gradual increase over the observed period. Starting around 0.88, it consistently rises to 0.94 by the end of the timeframe. This indicates a potentially increasing reliance on debt financing or a shift in the company’s capital structure, resulting in a higher proportion of earnings allocated to interest payments.

EBIT Margin

The EBIT margin shows a notable upward trajectory. Beginning at 21.52%, it experiences a decline through 2022, reaching a low of 18.88%. However, a strong recovery and subsequent growth are evident, culminating in a margin of 29.88% by the final period. This suggests improved operational efficiency, effective cost management, or increased pricing power.

Net Profit Margin

The net profit margin mirrors the trend observed in the EBIT margin, albeit with a lower overall magnitude. It declines from 16.47% to 13.16% in 2022, then steadily increases to 24.30% by the end of the period. The increasing gap between the EBIT margin and net profit margin suggests that factors beyond operational profitability, such as changes in non-operating income or expenses, are influencing the bottom line. Specifically, the increasing interest burden appears to be partially offsetting the gains in EBIT margin, but the overall effect is positive net profit growth.

In summary, the company demonstrates improving operational performance as evidenced by the rising EBIT margin. While the increasing interest burden presents a potential headwind, the net profit margin ultimately benefits from the strong EBIT performance and stable tax burden, resulting in substantial profitability gains over the analyzed period.