We recently published a list of 10 Most Profitable Tech Stocks to Buy Now. In this article, we are going to take a look at where Netflix, Inc. (NASDAQ:NFLX) stands against other most profitable tech stocks to buy now.
Profitability remains one of the most sought-after traits in the technology sector, yet it is also one of the most complex. It is shaped by a delicate balance of investment cycles, competition, and market perception. While topline growth often takes center stage—driving valuations and attracting top talent—sustained profitability becomes crucial as industries mature, competition peaks, and new investments become necessary for survival. In this ever-evolving landscape, technology companies have mastered the art of balancing revenue expansion with profit growth by diversifying their businesses, building vast customer ecosystems, and continuously enhancing product experiences.
Looking ahead, earnings growth will take on an even greater role in determining valuations, particularly as the breakneck pace of growth begins to slow. Investors will increasingly focus on sustainable profitability rather than just rapid growth. In a January 2024 article, Rob Haworth, Senior Investment Strategy Director at U.S. Bank Asset Management, emphasized that technology companies possess strong earnings growth potential, largely independent of traditional business cycles. He explained:
“What is not clear yet is how companies investing in AI as a way to increase efficiencies or monetize services for end users will benefit from these advancements. We’re in a consolidation phase to figure out what revenue growth will be going forward. If AI helps boost productivity, that will support not only current rising stock valuations but individual prosperity as well.”
Franklin Templeton’s 2025 Technology Outlook echoes this sentiment, predicting another year of strong growth in the sector. The report notes that the “Magnificent Seven”—a group of leading tech giants—delivered exceptional earnings in 2024, outpacing both the broader market and the tech industry itself. While these companies are expected to maintain strong momentum, The firm anticipates that the rest of the sector may start catching up in 2025.
Tech investments are projected to grow exponentially in the coming years, reshaping the profitability landscape. Emerging technologies such as artificial intelligence, quantum computing, and autonomous systems present both immense opportunities and significant challenges. Some companies will achieve sustainable profit margins through strategic pricing and ecosystem advantages, while others will struggle under the weight of fierce competition and heavy reinvestment costs. For investors and stakeholders, understanding these shifting dynamics is key to navigating the ever-changing tech sector.
Our Methodology
To identify the 10 most profitable stocks, we conducted extensive research on U.S.-listed technology and tech-adjacent companies with a market capitalization of at least $2 billion. Rather than relying solely on absolute net income, we refined our selection criteria by focusing on companies with both an operating margin and net profit margin exceeding 20%. This approach ensures that high-margin firms are not overshadowed by larger corporations with higher overall earnings. After applying these filters, we ranked the stocks in ascending order based on their trailing twelve-month net income, with the company reporting the highest net income securing the top position.
Note: All pricing data is as of market close on February 14.
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Netflix, Inc. (NASDAQ:NFLX)
TTM Net Income: $8.7 billion
Number of hedge funds: 121
With around $9.0 billion in annual net profits, Netflix, Inc. (NASDAQ:NFLX) secures the 10th position on this list. The advent of Netflix, Inc. (NASDAQ:NFLX) revolutionized digital streaming and disrupted traditional TV and movie consumption. As a global streaming entertainment service, Netflix offers a diverse array of movies, TV shows, games, and more, with unlimited viewing on internet-connected devices. With over 300 million paid memberships in more than 190 countries, Netflix (NASDAQ:NFLX) has solidified its position as a dominant player in the entertainment industry, continually innovating its content offerings and user experience. The company commands an operating margin of 27% and net profit margin of 22%.
Netflix, Inc. (NASDAQ:NFLX) has been intensifying efforts to expand its content library, including original content, and enhance user engagement through original programming and strategic partnerships. The company has invested substantially in creating exclusive content, significantly contributing to subscriber growth. Moreover, Netflix (NASDAQ:NFLX) is exploring new revenue streams, such as ad-supported subscription tiers and gaming, aiming to attract a broader audience and increase overall revenue. According to company management, there are over 750 million broadband households (excluding China and Russia) and more than $650 billion of entertainment revenue globally, of which the company captured only about 6% in 2024, leaving a vast addressable opportunity.
In January 2025, Netflix, Inc. (NASDAQ:NFLX) reported strong Q4 2024 earnings that exceeded analyst expectations. For the quarter, the company added 18.9 million paid streaming customers, more than double what analysts had projected. Management also raised its revenue growth guidance to 12%-14% year-on-year and increased its operating margin guidance to 29% from the previous 28%.
Analysts’ views on Netflix, Inc. (NASDAQ:NFLX) have largely turned positive following these results. On January 24, a Bernstein analyst upgraded the stock from Market Perform to Outperform, raising the price target from $975 to $1,200. The analyst believes that international growth could drive double-digit subscriber increases in 2025 and pointed out that many markets remain underpenetrated. Netflix (NASDAQ:NFLX)’s growth initiatives, including the ad-supported tier, are expected to support substantial user expansion. As per his February 12 report, the analyst has maintained his Buy rating and price target. On February 13, JP Morgan reiterated their Overweight rating and $1,150 price target despite the strong share price rally after the results. They anticipate Netflix’s 2025 revenue growth will be propelled by strong engagement, organic subscriber growth, and higher average revenue per membership through recent price increases.
Overall, NFLX ranks 10th on our list of most profitable tech stocks to buy now. While we acknowledge the potential of NFLX to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NFLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
