Netflix unveils its first-quarter results Thursday afternoon. The report will kick off a rather momentous earnings season for media amid churning stock markets and recession jitters prompted by the Trump administration’s global tariffs.
Traditionally the company that fires the starting gun for entertainment and tech numbers every three months, Netflix may be a calming place to start this time. As tariffs cast a pall across business sectors including media, the streaming giant may be Wall Street‘s top stock pick to weather the macroeconomic storm. Oppenheimer analyst Jason Helfstein calls it the “cleanest story” in media in the case of a U.S. or global recession.
The company has little tariff exposure, sustainable 2025 growth, strong engagement data and has gotten to the other side of a round of price increases, which bug customers but enthuse profit-hungry investors. This will be the first quarter when Netflix doesn’t report subscriber numbers, but it has a number of other metrics to trumpet and has been solidly profitable for years, a claim most other streaming players can’t yet make.
Netflix is only minimally exposed to advertising, which right now is ideal, after introducing a cheaper ad tier less than three years ago. A nascent business is less exposed as low consumer confidence, anticipated inflation and economic uncertainty have Wall Streeters warning of an advertising pullback. Advertising makes up a big chunk of revenue and profit at companies like Fox Corp., Paramount Global and Warner Bros. Discovery to Meta and Snap. The ad business was hit hard during the past two recessions and slow to recover, which left leaving the media landscape transformed.
“Given the ongoing secular headwinds facing the linear TV ecosystem, we worry that television could mirror the fate of radio and newspapers during past recessions,” research firm MoffettNathanson wrote in a recent client note. “Should budgets shift away from linear TV at an accelerated pace, we see risk of a more permanent reallocation towards connected TV and broader digital channels.” He see $45 billion in lost U.S. advertising spend versus current forecasts if GDP growth slows in 2025.
To limit downside risk, the firm’s Michael Nathanson pinpoints Netflix and Alphabet as “offering compelling entry points.” The firm has ‘buy’ recommendations on both, as well as on Disney, WBD and Meta. It has ‘hold’ ratings on Fox, Paramount, Roku and Snap. But it also said it’s waiting to revise forecasts ahead of “further clarity during earnings calls.” It’s an understatement to say that CEO commentary over the next few weeks is highly anticipated.
Beyond advertising, analysts fret about parks, which generate key revenue at Disney and Comcast, with the latter’s NBCUniversal division set to open Epic Universe in May. Nathanson notes that historical recessions (in 2001-2002 and 2008-2009) squeezed domestic parks. In the event of a recession, he predicted, Disney’s U.S. revenue would be several billion dollars below his estimates for both this year and next.
Trump’s tariffs have angered U.S. allies. Airlines are sounding a cautionary note and analysts in that sector note dip in foreign travel to the U.S. in March from the year before.
Jessica Reif Ehrlich of BofA Securities think Epic Universe could provide a nice boost to the sector in trying times, along with new Disney cruise ships and a rise in per capital spending at Disney parks.
That said, BofA has had to rethink its outlook. “Entering the year, we were bullish on the Media & Entertainment industry in part driven by a potential cycle of M&A, but this thesis has clearly not played out (and appears unlikely) given the current Administration’s unfavorable view of some companies in our coverage,” Reif Ehrlich wrote in a note to clients. Media and entertainment, in a state of seemingly never-ending tumult, navigating Covid and then Hollywood talent strikes over the past few years, “now faces the economic uncertainty and market volatility created by the risk of tariffs.”
BofA economists are not forecasting a recession but see a drag on growth that could bring the economy to the precipice. “While typical recession risk mainly impacts revenue, tariffs could lead to higher costs,” the analyst noted, in areas like raw materials for sets, or a loss of foreign tax incentives for production.
She sees Netflix and Spotify as best-positioned in the field and preferred buys as both have nascent ad businesses and strong subscription models with “critical entertainment which historically performs well in a recession.”
Netflix Faces “Limited Risk”
Oppenheimer’s Helfstein says that while Netflix could be confronted with higher churn, weaker gross subscriber additions or subscribers trading down to cheaper plans given the deteriorating economic picture. Still, he says the firm sees “limited risk overall.” Citing a 2011 Stanford survey, he said consumers spend more time at home during economic hardship, and time spent watching TV increased during the last U.S. recession. (And we all remember the explosion of viewing and sign-ups in 2020.)
Netflix is offering both secular growth, as it embarks on a new advertising revenue strategy among selective price increases, says David Joyce of Seaport Research, calling it “the best of both worlds as the low price points globally offer a great deal of value for the engagement levels – which is exhibited in good times and bad.” Generally, what makes Netflix and other streamers a “defensive stay-cation alternative if we enter a recession is that it’s likely to be one of the last expenditures cut from a consumer’s budget.” A monthly premium subscription is cheaper than a sporting event, a concert and even an Imax ticket. Although exhibitors also tend to benefit in economic downturns. He has a buy on the stock.
The first quarter brought one of the company’s biggest hits ever, Adolescence, showing continued momentum after it blew past estimates to top 303 million subscribers as of the end of 2024.
Loop Capital’s Alan Gould said the Ted Sarandos- and Greg Peters-led streamer should be among the most economically resilient companies in the current climate and least impacted by tariffs. For the first three months of 2025, Gould is forecasting $10.54 billion in revenue; operating income of $3 billion; net income of $2.456 billion; and diluted earnings per share of $5.63. Wall Street consensus is close at $10.51 billion of revenue; just under $3 billion in operating income; $2.473 million net profit; and EPS of $5.67, he noted, as per investment researcher VisibleAlpha.
“Both we and the Street and us are expecting a small revenue, operating income and EPS beat. The quarter will benefit from about a half quarter of the price increase in the UCAN region and a month in the UK. As discussed in our March 24 report, here, engagement appears to have been up 5% for the quarter based on NFLX’s weekly Top 10 global titles in English, non-English, film and series,” Gould said in a report yesterday. “Engagement was down for the 4 weeks from late February to mid-March, coinciding with 1 month after the US price increase was fully in effect, but engagement has since bounced back the past 3 weeks”.
Any and all financial metrics will be taking on increased significance when company reports after market close Thursday because – and this is big – it will be the first quarter ever Netflix won’t be revealing monthly subscriber numbers. That prospect freaked out analysts when it was floated last year although some say it has the benefit of tamping down some of the volatility around the stock, which can get buffeted subscriber numbers from quarter to quarter. Netflix has said that it will still provide that data in certain situations, like when it hits milestones. It also will likely continue characterizing growth in its ad-supported tier, using montly active users (MAUs) as the key metric, which is different from subscribers.
Upbeat sentiment on the streamer accelerated this week after a WSJ report that the company’s top brass shared some ambitious goals at an annual business review with senior staff – namely, plans to achieve a $1 trillion market cap and double its revenue by 2030. The outlook included growth targets for ad sales – of $9 billion globally by 2030, and tripling operating income from $10 billion in 2024.
Tariff Trauma
The saga of tariffs – imposed under a Trump declared “national emergency” in foreign trade – has been fast-moving, hard to follow and value-destroying. On April 2, the administration announced sweeping tariffs targeting 60 countries with a baseline 10% tariff on nearly all remaining imports that had not been taxed already, calling it Liberation Day. Trump then announced hefty, additional reciprocal tariffs on most countries, tanking markets.
He later walked those back to allow for negotiations. When China publicly chastised the administration, Trump raised tariffs on Chinese goods to 145%. China quickly confirmed will cut back imports of Hollywood films, which could impact media company revenue.
Last Friday, Trump suspended tariffs on electronics like iPhone and laptops from China – where most are made. But the administration also said it’s probing the “whole” tech supply chain, meaning products like chips and semiconductors may not be excluded from tariffs.
He also has hinted yesterday that he might give tariff relief to certain automakers to give them more time to move production the U.S. Relief also might also extend to car components.
Tariffs on a major trading partner, the European Union, will likely stay in place as negotiations appear to have stalled, according to a number of developments on Tuesday.
Wedbush analyst Dan Ives, who has been putting out sometimes twice-daily updates on the tariff situation in recent weeks, said Tuesday that “the price impacts from this head-scratching tariff slate could result in demand destruction of 15%-20%” for new car purchases in the U.S. this year. That would add $100 million to automakers’ costs and raise the price of new cars by up to $15K. Automakers are a key advertising category.
Trump’s goal is to move production back to the U.S., but that would take years after decades of globalization.
“We reiterate the concept of a U.S. made car with all U.S. parts is a fairy tale fictional narrative” and not even possible now, Ives wrote. Craig Moffett of MoffettNathanson has also been among those pointing out that a shift by Apple from China-based iPhone production to American manufacturing for the device, which accounts for half of the tech giant’s revenue, would take decades.
Given the uncertainty, companies are unlikely to commit capital based on protectionist policies that may not last beyond 2028, Nathanson said. Entertainment, unlike auto parts or lumber or liquor or shoes, is a service, not a good, so not subject to tariffs.
Recession Risk
Of the more than 300 CEOs surveyed in April by an industry group called Chief Executive that conducts monthly polls, 62% saw a recession or other economic downturn in the next six months – up from 48% who had that forecast in March.
BlackRock CEO Larry Fink said during a recent interview that the U.S. may already be in a recession or getting close to one due to President Trump’s tariffs.
The tariff debate escalated as banks were out with quarterly numbers, the first sector to report each earnings season.
Goldman Sachs CEO David Solomon said Monday the prospect of a recession has increased amid the uncertainties of a trade war alongside growing indications that economic global economc activity is slowing.
Influential JP Morgan CEO Jamie Dimon also said tariffs could spur inflation, weaker economic growth and, potentially, a recession. “Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth,” he said in his annual letter to shareholders Monday.
