filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
57K characters. Original on sec.gov · Markdown
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
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; 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.
We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, unless required by law.
Investors and others should note that we announce material financial and other information to our investors using our investor relations website (ir.netflix.net), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media and blogs to communicate with our members and the public about our company, our services and other issues. It is possible that the information we post on social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels and blogs listed on our investor relations website.
Overview
We are one of the world’s leading entertainment services offering TV series, films and games across a wide variety of genres and languages. Members can play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time.
Our core strategy is to grow our business globally within the parameters of our operating margin target. We strive to continuously improve our members' experience by offering compelling content that delights them and attracts new members. We aim to offer a range of pricing plans, including our ad-supported subscription plan, to meet a variety of consumer needs. We seek to drive conversation around our content to further enhance member joy, and we are continuously enhancing our user interface to help our members more easily choose content that they will find enjoyable.
Results of Operations
The following represents our consolidated performance highlights(1):
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Financial Results: | |||||||||||||||||||||||
| Revenues | $ | 11,079,166 | $ | 9,559,310 | $ | 1,519,856 | 16 | % | |||||||||||||||
| Constant currency change in revenues(2) | 17 | % | |||||||||||||||||||||
| Operating income | $ | 3,774,694 | $ | 2,602,837 | $ | 1,171,857 | 45 | % | |||||||||||||||
| Operating margin | 34.1 | % | 27.2 | % | 6.9 | % | |||||||||||||||||
| Net income | $ | 3,125,413 | $ | 2,147,306 | $ | 978,107 | 46 | % |
(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.
(2) See the “Non-GAAP Constant Currency Information” section below for additional details on our use of constant currency revenue.
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.
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.
Revenues
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.
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.
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | |||||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | ||||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Revenues | $ | 11,079,166 | $ | 9,559,310 | $ | 1,519,856 | 16 | % | ||||||||||||||||||
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | |||||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | ||||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Revenues | $ | 21,621,967 | $ | 18,929,750 | $ | 2,692,217 | 14 | % | ||||||||||||||||||
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.
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.
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | |||||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | ||||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| United States and Canada (UCAN) | $ | 4,929,003 | $ | 4,295,560 | $ | 633,443 | 15 | % | ||||||||||||||||||
| Europe, Middle East, and Africa (EMEA) | 3,538,175 | 3,007,772 | 530,403 | 18 | % | |||||||||||||||||||||
| Latin America (LATAM) | 1,306,735 | 1,204,145 | 102,590 | 9 | % | |||||||||||||||||||||
| Asia-Pacific (APAC) | 1,305,253 | 1,051,833 | 253,420 | 24 | % | |||||||||||||||||||||
| Total Revenues | $ | 11,079,166 | $ | 9,559,310 | $ | 1,519,856 | 16 | % | ||||||||||||||||||
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | |||||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | ||||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| United States and Canada (UCAN) | $ | 9,546,101 | $ | 8,519,875 | $ | 1,026,226 | 12 | % | ||||||||||||||||||
| Europe, Middle East, and Africa (EMEA) | 6,942,851 | 5,965,965 | 976,886 | 16 | % | |||||||||||||||||||||
| Latin America (LATAM) | 2,568,669 | 2,369,153 | 199,516 | 8 | % | |||||||||||||||||||||
| Asia-Pacific (APAC) | 2,564,346 | 2,074,757 | 489,589 | 24 | % | |||||||||||||||||||||
| Total Revenues | $ | 21,621,967 | $ | 18,929,750 | $ | 2,692,217 | 14 | % | ||||||||||||||||||
Non-GAAP Constant Currency Information
We believe the non-GAAP financial measure of constant currency revenue is useful in analyzing period-to-period comparisons in revenues absent foreign currency fluctuations. However, this non-GAAP financial measure should be considered in addition to, not as a substitute for, or superior to other financial measures prepared in accordance with GAAP.
In order to exclude the effect of foreign currency rate fluctuations on revenue, we calculate current period revenue assuming foreign exchange rates had remained constant with foreign exchange rates from each of the corresponding months of the prior-year period and exclude the impact of hedging gains or losses realized as revenues. Constant currency percentage change in revenues is calculated as the percentage change between current period constant currency revenue and the prior comparative period revenue. The impact of hedging gains or losses is excluded from both the current and prior periods.
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:
| Three Months Ended | Three Months Ended | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| As Reported | Constant Currency Adjustment | Hedging (Gains) Losses Included in Revenues | Constant Currency Revenues | As Reported | Hedging (Gains) Losses Included in Revenues | Revenues Less Hedging Impact | Reported Change | Constant Currency Change | ||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UCAN | $ | 4,929,003 | $ | 8,036 | $ | (6,431) | $ | 4,930,608 | $ | 4,295,560 | $ | (3,183) | $ | 4,292,377 | 15 | % | 15 | % | ||||||||||||||||||||||||||||||||||||||
| EMEA | 3,538,175 | (122,664) | 42,049 | 3,457,560 | 3,007,772 | (15,344) | 2,992,428 | 18 | % | 16 | % | |||||||||||||||||||||||||||||||||||||||||||||
| LATAM | 1,306,735 | 161,306 | 14,033 | 1,482,074 | 1,204,145 | (1,759) | 1,202,386 | 9 | % | 23 | % | |||||||||||||||||||||||||||||||||||||||||||||
| APAC | 1,305,253 | (16,166) | (12,266) | 1,276,821 | 1,051,833 | (13,015) | 1,038,818 | 24 | % | 23 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Total Revenues | $ | 11,079,166 | $ | 30,512 | $ | 37,385 | $ | 11,147,063 | $ | 9,559,310 | $ | (33,301) | $ | 9,526,009 | 16 | % | 17 | % |
| Six Months Ended | Six Months Ended | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| As Reported | Constant Currency Adjustment | Hedging (Gains) Losses Included in Revenues | Constant Currency Revenues | As Reported | Hedging (Gains) Losses Included in Revenues | Revenues Less Hedging Impact | Reported Change | Constant Currency Change | ||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UCAN | $ | 9,546,101 | $ | 31,374 | $ | (20,983) | $ | 9,556,492 | $ | 8,519,875 | $ | (2,352) | $ | 8,517,523 | 12 | % | 12 | % | ||||||||||||||||||||||||||||||||||||||
| EMEA | 6,942,851 | 24,311 | (63,176) | 6,903,986 | 5,965,965 | (10,657) | 5,955,308 | 16 | % | 16 | % | |||||||||||||||||||||||||||||||||||||||||||||
| LATAM | 2,568,669 | 404,374 | 97 | 2,973,140 | 2,369,153 | 4,507 | 2,373,660 | 8 | % | 25 | % | |||||||||||||||||||||||||||||||||||||||||||||
| APAC | 2,564,346 | 46,077 | (43,349) | 2,567,074 | 2,074,757 | (13,558) | 2,061,199 | 24 | % | 25 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Total Revenues | $ | 21,621,967 | $ | 506,136 | $ | (127,411) | $ | 22,000,692 | $ | 18,929,750 | $ | (22,060) | $ | 18,907,690 | 14 | % | 16 | % |
Cost of Revenues
Cost of revenues primarily consists of the amortization of content assets. Other costs of revenues include expenses associated with the acquisition, licensing and production of content, streaming delivery costs, and other operating costs.
Expenses related to the acquisition, licensing and production of content not included in content amortization may include payroll, stock-based compensation, facilities, and other personnel-related expenses, costs associated with obtaining rights to music included in our content, overall deals with talent, miscellaneous production-related costs and participations and residuals. Streaming delivery costs are primarily related to our global content delivery network (“Open Connect”). We have built our own Open Connect network to help us efficiently stream a high volume of content to our members over the internet. Delivery expenses, therefore, include equipment costs related to Open Connect, payroll and related personnel expenses and all third-party costs, such as cloud computing costs, associated with delivering content over the internet. Other operating costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs directly incurred in making our content available to members.
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Cost of revenues | $ | 5,325,311 | $ | 5,174,143 | $ | 151,168 | 3 | % | |||||||||||||||
| As a percentage of revenues | 48 | % | 54 | % |
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.
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Cost of revenues | $ | 10,588,458 | $ | 10,151,216 | $ | 437,242 | 4 | % | |||||||||||||||
| As a percentage of revenues | 49 | % | 54 | % |
The increase in cost of revenues was primarily due to a $215 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.
Sales and Marketing
Sales and marketing expenses consist primarily of expenses for promotional activities such as digital and television advertising, and certain payments made to marketing and advertising sales partners. Our marketing partners include consumer electronics manufacturers, multichannel video programming distributors, mobile operators, and internet service providers. Our advertising sales partners include advertising technology providers and advertising agencies. Sales and marketing expenses also include payroll, stock-based compensation, facilities, and other related expenses for personnel that support advertising sales and marketing activities.
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Sales and marketing | $ | 713,265 | $ | 644,084 | $ | 69,181 | 11 | % | |||||||||||||||
| As a percentage of revenues | 6 | % | 7 | % |
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.
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Sales and marketing | $ | 1,401,635 | $ | 1,298,424 | $ | 103,211 | 8 | % | |||||||||||||||
| As a percentage of revenues | 6 | % | 7 | % |
The increase in sales and marketing expenses was primarily driven by a $73 million increase in personnel-related costs due to the growth in advertising sales headcount, coupled with a $42 million increase in expenses incurred in connection with our advertising offering, including increased payments to advertising sales partners and other advertising distribution expenses.
Technology and Development
Technology and development expenses consist primarily of payroll, stock-based compensation, facilities, and other related expenses for technology personnel responsible for making improvements to our service offerings, including testing, maintaining and modifying our user interface, our recommendations and infrastructure. Technology and development expenses also include costs associated with general use computer hardware and software.
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Technology and development | $ | 824,683 | $ | 711,254 | $ | 113,429 | 16 | % | |||||||||||||||
| As a percentage of revenues | 7 | % | 7 | % |
The increase in technology and development expenses was primarily due to a $114 million increase in personnel-related costs.
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Technology and development | $ | 1,647,506 | $ | 1,413,727 | $ | 233,779 | 17 | % | |||||||||||||||
| As a percentage of revenues | 8 | % | 7 | % |
The increase in technology and development expenses was primarily due to a $230 million increase in personnel-related costs.
General and Administrative
General and administrative expenses consist primarily of payroll, stock-based compensation, facilities, and other related expenses for corporate personnel. General and administrative expenses also include professional fees and other general corporate expenses.
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| General and administrative | $ | 441,213 | $ | 426,992 | $ | 14,221 | 3 | % | |||||||||||||||
| As a percentage of revenues | 4 | % | 4 | % |
The increase in general and administrative expenses was primarily due to an $8 million increase in personnel-related costs.
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| General and administrative | $ | 862,675 | $ | 831,012 | $ | 31,663 | 4 | % | |||||||||||||||
| As a percentage of revenues | 4 | % | 4 | % |
The increase in general and administrative expenses was primarily due to a $27 million increase in third-party expenses.
Interest Expense
Interest expense consists primarily of the interest associated with our outstanding debt obligations, including the amortization of debt issuance costs. See Note 6 Debt in the accompanying notes to our consolidated financial statements for further detail on our debt obligations.
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Interest expense | $ | 182,649 | $ | 167,986 | $ | 14,663 | 9 | % | |||||||||||||||
| As a percentage of revenues | 2 | % | 2 | % |
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Interest expense | $ | 366,821 | $ | 341,300 | $ | 25,521 | 7 | % | |||||||||||||||
| As a percentage of revenues | 2 | % | 2 | % |
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.
Interest and Other Income (Expense)
Interest and other income (expense) consists primarily of foreign exchange gains and losses on foreign currency denominated balances, gains and losses on certain derivative instruments, and interest earned on cash, cash equivalents and short-term investments.
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Interest and other income (expense) | $ | 39,630 | $ | 79,005 | $ | (39,375) | (50) | % | |||||||||||||||
| As a percentage of revenues | — | % | 1 | % |
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.
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Interest and other income (expense) | $ | 90,529 | $ | 234,364 | $ | (143,835) | (61) | % | |||||||||||||||
| As a percentage of revenues | — | % | 1 | % |
Interest and other income (expense) decreased in the six months ended June 30, 2025 primarily due to foreign exchange losses of $72 million, net of the impacts of derivatives and hedging, compared to gains of $115 million for the corresponding period in 2024. In the six months ended June 30, 2025, the foreign exchange losses were primarily driven by the non-cash loss of $84 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 six months ended June 30, 2024, the foreign exchange gains were primarily driven by the non-cash gain of $173 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 $24 million increase in interest income earned in the six months ended June 30, 2025 as compared to the corresponding period in 2024.
Provision for Income Taxes
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Provision for income taxes | $ | 506,262 | $ | 366,550 | $ | 139,712 | 38 | % | |||||||||||||||
| Effective tax rate | 14 | % | 15 | % |
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Provision for income taxes | $ | 829,637 | $ | 648,920 | $ | 180,717 | 28 | % | |||||||||||||||
| Effective tax rate | 12 | % | 13 | % |
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.
Liquidity and Capital Resources
| As of | Change | ||||||||||||||||||||||
| June 30, 2025 | December 31, 2024 | June 30, 2025 vs. December 31, 2024 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Cash, cash equivalents, restricted cash and short-term investments | $ | 8,393,688 | $ | 9,586,343 | $ | (1,192,655) | (12) | % | |||||||||||||||
| Short-term and long-term debt | 14,453,206 | 15,582,804 | (1,129,598) | (7) | % |
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.
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.
We anticipate that we may periodically raise additional debt capital. Our ability to obtain this or any additional financing that we may choose or need, including for the refinancing of upcoming maturities or potential strategic acquisitions and investments, will depend on, among other things, our development efforts, business plans, operating performance and the condition of the capital markets at the time we seek financing. We may not be able to obtain such financing on terms acceptable to us or at all. If we raise additional funds through the issuance of equity or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience dilution.
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.
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.
Our material cash requirements from known contractual and other obligations primarily relate to our content, debt and lease obligations. As of June 30, 2025, the expected timing of those payments are as follows:
| Payments due by Period | ||||||||||||||||||||
| Contractual obligations (in thousands): | Total | Next 12 Months | Beyond 12 Months | |||||||||||||||||
| Content obligations (1) | $ | 20,967,270 | $ | 10,842,959 | $ | 10,124,311 | ||||||||||||||
| Debt (2) | 18,432,396 | 690,046 | 17,742,350 | |||||||||||||||||
| Operating lease obligations (3) | 2,843,639 | 544,910 | 2,298,729 | |||||||||||||||||
| Total | $ | 42,243,305 | $ | 12,077,915 | $ | 30,165,390 |
(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.
The material cash requirements above do not include any estimated obligation for the unknown future titles, payment for which could range from less than one year to more than five years. However, these unknown obligations are expected to be significant and we believe could include approximately $1 billion to $4 billion over the next three years, with the payments for the vast majority of such amounts expected to occur after the next twelve months. The foregoing range is based on considerable management judgments and the actual amounts may differ. Once we know the title that we will receive and the license fees, we include the amount in the contractual obligations table above.
(2)Debt obligations include our Notes consisting of principal and interest payments. See Note 6 Debt to the consolidated financial statements for further details.
(3)Operating lease obligations are comprised of operating lease liabilities included in "Accrued expenses and other liabilities" and "Other non-current liabilities" on the Consolidated Balance Sheets, inclusive of imputed interest. Operating lease obligations also include additional obligations that are not reflected on the Consolidated Balance Sheets as they did not meet the criteria for recognition. See Note 5 Balance Sheet Components in the accompanying notes to our consolidated financial statements for further details regarding leases.
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.
Cash Flows
The following tables summarize our cash flows:
Three months ended June 30, 2025 as compared to the three months ended June 30, 2024
| Three Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | Q2'25 vs. Q2'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 2,423,258 | $ | 1,290,847 | $ | 1,132,411 | 88 | % | |||||||||||||||
| Net cash provided by (used in) investing activities | 768,684 | (78,287) | 846,971 | 1,082 | % | ||||||||||||||||||
| Net cash used in financing activities | (2,502,868) | (1,489,381) | 1,013,487 | 68 | % |
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.
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.
Net cash used in financing activities for the three months ended June 30, 2025 increased $1,013 million as compared to the corresponding period in 2024, primarily driven by $1,033 million in repayments of debt in the three months ended June 30, 2025 as compared to no repayments of debt in the corresponding period in 2024.
Six months ended June 30, 2025 as compared to the six months ended June 30, 2024
| Six Months Ended | Change | ||||||||||||||||||||||
| June 30, 2025 | June 30, 2024 | YTD'25 vs. YTD'24 | |||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 5,212,457 | $ | 3,503,369 | $ | 1,709,088 | 49 | % | |||||||||||||||
| Net cash provided by (used in) investing activities | 1,254,346 | (154,001) | 1,408,347 | 915 | % | ||||||||||||||||||
| Net cash used in financing activities | (6,531,184) | (3,622,325) | 2,908,859 | 80 | % |
Net cash provided by operating activities for the six months ended June 30, 2025 increased $1,709 million as compared to the corresponding period in 2024, primarily driven by a $1,536 million or 34% increase in net income, a $323 million decrease in payments for content assets, and a $487 million increase in adjustments for non-cash expenses, partially offset by $637 million in unfavorable changes in working capital.
Net cash provided by (used in) investing activities for the six months ended June 30, 2025 increased $1,408 million as compared to the corresponding period in 2024, primarily due to net cash inflows of $1,575 million from maturities, sales and purchases of investments in the six months ended June 30, 2025 as compared to no cash flows related to investments in the corresponding period in 2024, partially offset by a $130 million increase in purchases of property and equipment.
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.
Indemnification
The information set forth under Note 8 Commitments and Contingencies to the consolidated financial statements under the caption “Indemnification” is incorporated herein by reference.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2024, describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates included in our Annual Report on Form 10-K for the year ended December 31, 2024.
Previous: Cover and table of contents · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk