NETFLIX INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding: our core strategy; our ability to improve our content offerings and service; our future financial performance, including expectations regarding revenues, deferred revenue, operating income and margin, net income, expenses, and profitability; liquidity, including the sufficiency of our capital resources, net cash provided by (used in) operating activities, access to financing sources and free cash flows; capital allocation strategies, including any stock repurchases or repurchase programs; seasonality; stock price volatility; impact of foreign exchange rate fluctuations, including on net income, revenues; expectations regarding hedging activity; impact of interest rate fluctuations; adequacy of existing facilities; future regulatory changes and their impact on our business; intellectual property; cybersecurity; price changes and testing; accounting treatment for changes related to content assets; acquisitions; actions by competitors; partnerships; advertising; multi-household usage; reporting of membership-related data; member viewing patterns; dividends; future contractual obligations, including unknown content obligations and timing of payments; our global content and marketing investments, including investments in original programming, consumer products and live experiences; impact of work stoppages; content amortization; resolution of tax examinations; tax expense; unrecognized tax benefits; deferred tax assets; resolution of disputes and other proceedings; our ability to effectively manage change and growth; our company culture; and our ability to attract and retain qualified employees and key personnel. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on January 27, 2025, in particular the risk factors discussed under the heading “Risk Factors” in Part I, Item 1A.

Current wording

seasonality; stock price volatility; impact of foreign exchange rate fluctuations, including on net income, revenues; expectations regarding hedging activity; impact of interest rate fluctuations; adequacy of existing facilities; future regulatory changes and their impact on our business; intellectual property; cybersecurity; price changes and testing; accounting treatment for changes related to content assets; acquisitions; actions by competitors; partnerships; advertising; multi-household usage; reporting of membership-related data; member viewing patterns; dividends; future contractual obligations, including unknown content obligations and timing of payments; our global content and marketing investments, including investments in original programming, consumer products and live experiences; impact of work stoppages; content amortization; resolution of tax examinations; tax expense; unrecognized tax benefits; deferred tax assets; the impact of the OBBBA; resolution of disputes and other proceedings; our ability to effectively manage change and growth; our company culture; and our ability to attract and retain qualified employees and key personnel. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on January 27, 2025, in particular the risk factors discussed under the heading “Risk Factors” in Part I, Item 1A.

Previous wording

(1) We have discontinued the quarterly reporting of membership numbers, focusing instead on revenue and operating margin as the primary financial metrics that we believe best represent our business performance. Therefore, effective in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, we are no longer reporting streaming membership metrics, including paid net membership additions (losses), paid memberships at end of period, average paying memberships or average monthly revenue per paying membership.

Current wording

(1) We have discontinued the quarterly reporting of membership numbers, focusing instead on revenue and operating margin as the primary financial metrics that we believe best represent our business performance. Effective with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, we discontinued reporting streaming membership metrics, including paid net membership additions (losses), paid memberships at end of period, average paying memberships and average monthly revenue per paying membership.

Previous wording

Operating margin for the three months ended March 31, 2025 increased approximately four percentage points as compared to the prior comparative period, primarily due to revenues growing at a faster rate as compared to the growth in cost of revenues, sales and marketing, and general and administrative expenses.

Current wording

Operating margin for the three months ended June 30, 2025 increased by approximately seven percentage points as compared to the prior comparative period. The increase in operating margin was primarily driven by revenue growth outpacing the growth in cost of revenues, as well as by a slower rate of growth in sales and marketing and general and administrative expenses relative to revenue growth.

Previous wording

Net income for the three months ended March 31, 2025 increased $558 million as compared to the prior comparative period, primarily due to a $714 million increase in operating income, driven by a $1,172 million increase in revenues and partially offset by a $286 million increase in cost of revenues primarily due to the increase in content amortization. The impact of higher operating income was partially offset by a $130 million decrease in foreign exchange gains and losses and a $41 million increase in the provision for income taxes.

Current wording

Net income for the three months ended June 30, 2025 increased $978 million as compared to the prior comparative period, primarily due to a $1,172 million increase in operating income, driven by a $1,520 million increase in revenues and partially offset by a $151 million increase in cost of revenues primarily due to the increase in content amortization. The impact of higher operating income was partially offset by a $57 million decrease in foreign exchange gains and losses and a $140 million increase in the provision for income taxes.

Previous wording

We primarily derive revenues from monthly membership fees for services related to streaming content to our members. We offer a variety of streaming membership plans, the price of which varies by country and the features of the plan. As of March 31, 2025, pricing on our plans ranged from the U.S. dollar equivalent of $1 to $31 per month, and pricing on our extra member sub accounts ranged from the U.S. dollar equivalent of $2 to $9 per month. We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.

Current wording

We primarily derive revenues from monthly membership fees for services related to streaming content to our members. We offer a variety of streaming membership plans, the price of which varies by country and the features of the plan. As of June 30, 2025, pricing on our plans ranged from the U.S. dollar equivalent of $1 to $34 per month, and pricing on our extra member sub accounts ranged from the U.S. dollar equivalent of $2 to $9 per month. We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.

Previous wording

We also earn revenues from advertisements presented on our streaming service, consumer products, live experiences and various other sources. Revenues earned from sources other than monthly membership fees were not a material component of revenues for the three months ended March 31, 2025 and March 31, 2024.

Current wording

We also earn revenues from advertisements presented on our streaming service, consumer products, live experiences and various other sources. Revenues earned from sources other than monthly membership fees were not a material component of revenues for the three and six months ended June 30, 2025 and June 30, 2024.

Previous wording

Revenues for the three months ended March 31, 2025 increased 13% as compared to the three months ended March 31, 2024, primarily due to the growth in memberships and higher pricing, partially offset by unfavorable changes in foreign exchange rates, net of hedging.

Current wording

Revenues for the three and six months ended June 30, 2025 increased 16% and 14% as compared to the three and six months ended June 30, 2024, respectively, primarily due to the growth in memberships, higher pricing, and increased advertising revenue, partially offset by unfavorable changes in foreign exchange rates, net of hedging.

Previous wording

The following table summarizes revenue by region for the three months ended March 31, 2025 and 2024. Hedging gains (losses) of $165 million and $(11) million are included in “Revenues” for the three months ended March 31, 2025 and 2024, respectively. See Note 7 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

Current wording

The following tables summarize revenue by region for the three and six months ended June 30, 2025 and 2024. Total revenues are inclusive of hedging gains (losses) of $(37) million and $127 million for the three and six months ended June 30, 2025, respectively, and $33 million and $22 million for the three and six months ended June 30, 2024, respectively. See Note 7 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

Previous wording

The table below summarizes constant currency revenues by region for the three months ended March 31, 2025 and the constant currency percentage change in revenues by region for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024:

Current wording

The tables below summarize constant currency revenues by region for the three and six months ended June 30, 2025 and the constant currency percentage change in revenues by region for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024:

Previous wording

The increase in cost of revenues was primarily due to a $152 million increase in content amortization relating to our existing and new content.

Current wording

The increase in cost of revenues was primarily due to a $62 million increase in content amortization relating to our existing and new content. No individual component of the remaining increase in cost of revenues was material.

Previous wording

The increase in sales and marketing expenses was primarily driven by a $33 million increase in personnel-related costs due to the growth in advertising sales headcount, coupled with a $23 million increase in expenses incurred in connection with our advertising offering, including increased payments to advertising sales partners and other advertising distribution expenses. The increase in expenses related to personnel and our advertising offering was partially offset by an $18 million decrease in other marketing expenses.

Current wording

The increase in sales and marketing expenses was primarily driven by a $40 million increase in personnel-related costs due to the growth in advertising sales headcount, coupled with a $19 million increase in expenses incurred in connection with our advertising offering, including increased payments to advertising sales partners and other advertising distribution expenses, and a $12 million increase in other marketing expenses.

Previous wording

The increase in technology and development expenses was primarily due to a $116 million increase in personnel-related costs.

Current wording

The increase in technology and development expenses was primarily due to a $114 million increase in personnel-related costs.

Previous wording

The increase in general and administrative expenses was primarily due to a $25 million increase in third-party expenses.

Current wording

The increase in general and administrative expenses was primarily due to a $27 million increase in third-party expenses.

Previous wording

Interest expense primarily consists of interest on our Notes of $184 million for the three months ended March 31, 2025. The increase in interest expense for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was due to the increase in debt.

Current wording

Interest expense primarily consists of interest on our Notes of $182 million and $366 million for the three and six months ended June 30, 2025, respectively. The increase in interest expense for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024 was due to the higher average aggregate principal of our Notes outstanding.

Previous wording

Interest and other income (expense) decreased in the three months ended March 31, 2025 primarily due to foreign exchange losses of $36 million, net of the impacts of derivatives and hedging, compared to gains of $94 million for the corresponding period in 2024. In the three months ended March 31, 2025, the foreign exchange losses were primarily driven by the non-cash loss of $29 million from the remeasurement of our €5,170 million Senior Notes, net of hedging impacts, coupled with the remeasurement of cash and content liability positions in currencies other than the functional currencies. In the three months ended March 31, 2024, the foreign exchange gains were primarily driven by the non-cash gains from the remeasurement of our €5,170 million Senior Notes of $131 million, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies.

Current wording

Interest and other income (expense) decreased in the three months ended June 30, 2025 primarily due to foreign exchange losses of $36 million, net of the impacts of derivatives and hedging, compared to gains of $21 million for the corresponding period in 2024. In the three months ended June 30, 2025, the foreign exchange losses were primarily driven by the non-cash loss of $55 million from the remeasurement of our Senior Notes denominated in euro, net of hedging impacts, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies. In the three months ended June 30, 2024, the foreign exchange gains were primarily driven by the non-cash gain of $43 million from the remeasurement of our Senior Notes denominated in euro, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies. The change in foreign currency gains and losses was partially offset by a $9 million increase in interest income earned in the three months ended June 30, 2025 as compared to the corresponding period in 2024.

Previous wording

The decrease in the effective tax rate for the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to higher excess tax benefits on stock-based compensation.

Current wording

The decrease in the effective tax rates for the three and six months ended June 30, 2025, as compared to the same periods in 2024, was primarily due to higher excess tax benefits on stock-based compensation.

Previous wording

Cash, cash equivalents, restricted cash and short-term investments decreased $1,211 million in the three months ended March 31, 2025 primarily due to the repurchase of stock and repayment of debt, partially offset by cash provided by operations and proceeds from issuance of common stock.

Current wording

Cash, cash equivalents, restricted cash and short-term investments decreased $1,193 million in the six months ended June 30, 2025 primarily due to the repurchase of stock and repayment of debt, partially offset by cash provided by operations and proceeds from issuance of common stock.

Previous wording

Debt, net of debt issuance costs and discounts, decreased $566 million primarily due to the repayment upon maturity of the $800 million aggregate principal amount of our 5.875% Senior Notes, partially offset by the remeasurement of our euro-denominated notes in the three months ended March 31, 2025. The amount of principal and interest on our outstanding notes due in the next twelve months is $1,697 million. As of March 31, 2025, no amounts had been borrowed under the $3 billion Revolving Credit Agreement. See Note 6 Debt in the accompanying notes to our consolidated financial statements.

Current wording

Debt, net of debt issuance costs and discounts, decreased $1,130 million primarily due to approximately $1,833 million in repayments of debt, partially offset by the remeasurement of our euro-denominated notes in the six months ended June 30, 2025. The amount of principal and interest on our outstanding notes due in the next twelve months is $690 million. As of June 30, 2025, no amounts had been borrowed under the $3 billion Revolving Credit Agreement or the $3 billion Commercial Paper Program. See Note 6 Debt in the accompanying notes to our consolidated financial statements.

Previous wording

In September 2023, the Board of Directors authorized the repurchase of up to $10 billion of our common stock, with no expiration date, and in December 2024, the Board of Directors increased the share repurchase authorization by an additional $15 billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may discontinue any repurchases of our common stock at any time without prior notice. During the three months ended March 31, 2025, the Company repurchased 3,713,828 shares of common stock for an aggregate amount of $3.5 billion. As of March 31, 2025, $13.6 billion remains available for repurchases.

Current wording

In September 2023, the Board of Directors authorized the repurchase of up to $10 billion of our common stock, with no expiration date, and in December 2024, the Board of Directors increased the share repurchase authorization by an additional $15 billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may discontinue any repurchases of our common stock at any time without prior notice. During the six months ended June 30, 2025, the Company repurchased 5,238,736 shares of common stock for an aggregate amount of $5.2 billion (excluding the 1% excise tax on stock repurchases as a result of the Inflation Reduction Act of 2022). As of June 30, 2025, $12.0 billion remains available for repurchases.

Previous wording

Our primary uses of cash include the acquisition, licensing and production of content, marketing programs, streaming delivery, and personnel-related costs. Cash payment terms for non-original content have historically been in line with the amortization period. Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content. For example, production costs are paid as the content is created, well in advance of when the content is available on the service and amortized. We expect to continue to significantly invest in global content, particularly in original content, which will impact our liquidity. Our other uses of cash include strategic acquisitions and investments, as well as share repurchases. We currently anticipate that cash flows from operations, available funds and access to financing sources, including our revolving credit facility, will continue to be sufficient to meet our cash needs for the next twelve months and beyond.

Current wording

Our primary uses of cash include the acquisition, licensing and production of content, marketing programs, streaming delivery, and personnel-related costs. Cash payment terms for non-original content have historically been in line with the amortization period. Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content. For example, production costs are paid as the content is created, well in advance of when the content is available on the service and amortized. We expect to continue to significantly invest in global content, particularly in original content, which will impact our liquidity. Our other uses of cash include strategic acquisitions and investments, as well as share repurchases. We currently anticipate that cash flows from operations, available funds and access to financing sources, including our Revolving Credit Facility and Commercial Paper Program, will continue to be sufficient to meet our cash needs for the next twelve months and beyond.

Previous wording

(1)As of March 31, 2025, content obligations were comprised of $4.1 billion included in “Current content liabilities” and $1.7 billion of “Non-current content liabilities” on the Consolidated Balance Sheets and $16.0 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition.

Current wording

(1)As of June 30, 2025, content obligations were comprised of $4.1 billion included in “Current content liabilities” and $1.6 billion of “Non-current content liabilities” on the Consolidated Balance Sheets and $15.3 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition.

Previous wording

In addition to the material cash requirements summarized in the table above, we may be required to pay deposits of approximately $900 million related to certain direct and indirect taxes in the next twelve months, which are in excess of our typical annual obligations.

Current wording

In addition to the material cash requirements summarized in the table above, we may be required to pay deposits of approximately $800 million related to certain indirect taxes in the next twelve months, which are in excess of our typical annual obligations. During the three months ended June 30, 2025, we also paid tax deposits of approximately $200 million related to certain direct taxes that exceeded our regularly recurring obligations.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2025 increased $577 million as compared to the corresponding period in 2024, primarily driven by a $558 million or 24% increase in net income, an increase in adjustments for non-cash expenses, partially offset by unfavorable changes in working capital and a $43 million increase in payments for content assets.

Current wording

Net cash provided by operating activities for the three months ended June 30, 2025 increased $1,132 million as compared to the corresponding period in 2024, primarily driven by a $978 million or 46% increase in net income, a $366 million decrease in payments for content assets, and a $226 million increase in adjustments for non-cash expenses, partially offset by $438 million in unfavorable changes in working capital.

Previous wording

Net cash provided by (used in) investing activities for the three months ended March 31, 2025 increased $561 million as compared to the corresponding period in 2024, primarily due to net cash inflows of $614 million from maturities, sales and purchases of investments in the three months ended March 31, 2025 as compared to no cash flows related to investments in the corresponding period in 2024, partially offset by a $53 million increase in purchases of property and equipment.

Current wording

Net cash provided by (used in) investing activities for the three months ended June 30, 2025 increased $847 million as compared to the corresponding period in 2024, primarily due to net cash inflows of $961 million from maturities, sales and purchases of investments in the three months ended June 30, 2025 as compared to no cash flows related to investments in the corresponding period in 2024, partially offset by a $78 million increase in purchases of property and equipment.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2025 increased $1,895 million as compared to the corresponding period in 2024, primarily driven by a $1,536 million increase in repurchases of common stock, coupled with a $400 million increase in repayments of debt due to the repayment upon maturity of the $800 million aggregate principal amount of our 5.875% Senior Notes in the three months ended March 31, 2025 as compared to the repayment upon maturity of the $400 million aggregate principal amount of our 5.750% Senior Notes in the three months ended March 31, 2024.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025 increased $2,909 million as compared to the corresponding period in 2024, primarily driven by a $1,591 million increase in repurchases of common stock, coupled with a $1,433 million increase in repayments of debt due to repayments of approximately $1,833 million in the six months ended June 30, 2025 as compared to debt repayments of approximately $400 million in the six months ended June 30, 2024. The increase in cash outflows related to stock repurchases and debt repayments was partially offset by a $133 million increase in proceeds from the issuance of common stock.