Netflix's Profit Is at a Record and Its Stock Sits 35% Below Its High. Time to Buy the Stock?

Here's an odd pair of facts. Netflix (NASDAQ:NFLX) has never made more money than it is making right now -- net income over the past four reported quarters totals about $13.65 billion, comfortably above the record $10.98 billion the company earned in all of 2025. And yet the stock has fallen about 35% from its 52-week high of $126.71, trading near $82 as of this writing -- and that's after a bounce from about $72 early this month.

Profits are at an all-time high, and shares down by more than a third.

Is this a buying opportunity?

Image source: The Motley Fool.

The profit record holds up

One qualification first. That trailing profit includes a one-time boost: a $2.8 billion pre-tax termination fee (roughly $2.3 billion after tax) that Netflix collected in the first quarter, when its agreement to buy Warner Bros. Discovery's studios and streaming business ended, after Warner Bros. Discovery accepted a rival's higher offer. That money counts, but it won't repeat.

Set it aside, and the record still stands on the operating line. Netflix's operating income over the past four quarters totals about $14.4 billion, ahead of the $13.3 billion it generated in all of 2025.

And the operating trend is still improving. Second-quarter operating income rose 11% year over year to $4.2 billion, and management continues to forecast a 31.5% operating margin for 2026, expanding from 29.5% last year. The company's own outlook implies operating income growth of more than 20% this year.

In other words, whatever the market is worried about, it isn't the profit engine. That part keeps getting better.

The growth rate did change

What changed is the top line's speed. Netflix's year-over-year revenue growth peaked at 17.6% in the fourth quarter of 2025. It slowed to 16.2% in the first quarter of this year, then to 13.4% in the second. For the third quarter, management forecasts 11.7% growth (a clear deceleration, even if a gradual one).

For the full year, management's revenue outlook of $51.0 billion to $51.4 billion implies 13% to 14% growth for 2026, with advertising revenue -- roughly doubling to about $3 billion -- doing part of the work.

That's still healthy growth for a company this size. But it's a different trajectory than the one investors were paying for at the high. At $126.71, the stock traded at about 50 times its 2025 earnings of $2.53 per share -- a price-to-earnings multiple that only made sense if mid-to-high-teens revenue growth kept compounding for years to come. By the time management's slower-growth outlook was on the table, the market had cut that price-to-earnings multiple by more than a third, measured on earnings adjusted for the one-time fee.

Today, the stock's price-to-earnings ratio is about 25 as reported, or about 31 with the fee stripped out, and shares trade at about 21 times expected 2027 earnings. Same company, record profits, a much smaller price tag per dollar of earnings.

Is now a good time to buy Netflix stock?

Overall, I do think the sell-off that got shares to where they are today was justified. But I also don't think shares are cheap enough to make them a buy.

A multiple of 50 times earnings was pricing Netflix for a growth era that management itself says is moderating. The repricing since then isn't the market malfunctioning. It's the market updating its view to reflect a maturing business.

Now shares arguably look priced about right, trading about 21 times expected 2027 earnings. That's a reasonable price tag for a business forecasting 20%-plus operating income growth with advertising revenue on track to double. Additionally, Netflix remains arguably the best-positioned company in streaming.

Still, I think shares are priced more like a hold than a buy here. After all, growth could decelerate further in 2027 (management hasn't guided that far out), and competition for viewing time isn't letting up.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Warner Bros. Discovery. The Motley Fool has a disclosure policy.