$Netflix(NFLX.US) Q1 2025 Quick Interpretation: The first quarter performance exceeded expectations, with the main highlight being profitability. Meanwhile, management's guidance for the second quarter is also above market expectations. In a "turbulent" year, the company does not adjust its full-year revenue guidance, which to some extent indicates operational confidence and confirms the current subscription streaming's relatively low sensitivity to macroeconomic factors as a "safe haven." On the other hand, despite the significant beat in Q1, the unchanged full-year target may also reflect some cautious considerations from management.

1. Profit exceeds expectations in gross margin. The gross margin continued to rise significantly in the first quarter, attributed not only to the continued popularity of hit shows but also to price increases in multiple regions and the advancement of high-margin advertising. Management has raised the guidance for second-quarter profit margins, increasing the operating profit margin to 33% (up 1.5 percentage points quarter-on-quarter), but the full-year operating profit margin guidance remains at 29% for now.

2. Subscription growth mainly from Europe and Asia. Starting this year, subscription numbers are no longer disclosed, so Dolphin Research can only estimate the approximate increase in subscription users based on price increases in various regions. According to the estimates, overall subscription revenue in the first quarter grew by 12.5% year-on-year (16% year-on-year growth on a constant currency basis), slightly above expectations, with revenue growth mainly coming from an increase in subscription users.

Growth was particularly strong in Europe and Asia, mainly benefiting from the local content that was a hit during the season. In North America, however, as a core price increase region, user growth was weak, with estimates suggesting potential churn (quarter-on-quarter), but this is expected to be a short-term impact, and the company anticipates a recovery and accelerated growth in North American revenue in the second quarter.

3. Cash flow reaches a historical high. Free cash flow (Non-GAAP) in the first quarter was nearly $2.7 billion, a year-on-year increase of 25%. While monetization capability is at its peak due to the content cycle, the year-on-year growth rate of content investment is slowing.

According to the usual investment rhythm, there will be an acceleration in the second half of the year. However, considering the relatively turbulent environment this year, the original content investment budget of $18 billion may not be fully utilized due to cautious control. Competitors may also face this issue, but generally speaking, such times tend to be more favorable for the current leaders.