Netflix vs. Amazon: Which Streaming Giant Has Better Upside Potential?

As the streaming wars intensify and technology giants vie for consumer attention, Netflix NFLX and Amazon AMZN represent two distinctly different approaches to capturing entertainment dollars. While Netflix has built its empire as a pure-play streaming specialist, Amazon leverages its vast ecosystem encompassing cloud computing, e-commerce, and Prime Video to create a diversified entertainment and technology conglomerate.Both companies reported strong first-quarter 2025 results, with Netflix beating earnings expectations significantly and Amazon demonstrating robust growth across its segments. The streaming landscape continues evolving rapidly, with both companies investing heavily in content, technology, and new revenue streams like advertising and live events.Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.The Case for NFLX StockNetflix's investment thesis centers on its position as the dominant pure-play streaming platform with significant operating leverage and multiple emerging growth drivers. The company's first-quarter 2025 performance demonstrated strong fundamentals, with healthy subscriber growth and robust retention metrics despite economic headwinds. Management emphasized that engagement remains strong, with no significant changes in plan mix or churn patterns, showcasing the platform's resilience.The advertising opportunity represents Netflix's most compelling growth catalyst. The company expects to roughly double its advertising revenues in 2025, driven by its proprietary ad tech platform rollout across markets. With ads currently representing a small fraction of total revenues, this business line offers substantial upside as Netflix expands programmatic capabilities and enhanced targeting features. The ad-supported tier starting at $7.99 provides accessibility during economic uncertainty while creating new monetization avenues.Netflix's content strategy continues to strengthen its competitive moat. Recent announcements include major investments exceeding 1 billion euros in Spain through 2028, new partnerships like the TF1 Group distribution deal in France, and an expanding pipeline of original content across multiple genres and regions. The company's live events strategy, including the successful NFL Christmas games and upcoming Taylor-Serrano fight, demonstrates its ability to create water-cooler moments that drive subscriber acquisition and retention.The gaming initiative, while still nascent, represents another growth vector with minimal cannibalization risk. Netflix's approach focuses on premium, ad-free gaming experiences tied to popular IP, potentially unlocking value from the $140 billion gaming market over time.Management has also set ambitious but achievable targets, including doubling revenues by 2030 and achieving $9 billion in annual advertising revenues by the same year. The company's advertising business represents a significant growth opportunity, with the successful launch of Netflix's Ad Suite in the United States on April 1 and international expansion planned for this quarter. Management expects advertising revenues to double in 2025, creating a new revenue stream that complements its successful subscription model.The Zacks Consensus Estimate for 2025 earnings is pegged at $25.32 per share, indicating 27.69% growth year over year. Netflix, Inc. Price and Consensus Netflix, Inc. price-consensus-chart | Netflix, Inc. QuoteFind the latest earnings estimates and surprises on Zacks Earnings Calendar.The Case for AMZN StockAmazon's investment case rests on its diversified business model and dominant positions across multiple high-growth markets. AWS remains the crown jewel, generating $29.3 billion in quarterly revenues with 17% growth and expanding to a $117 billion annualized run rate.Amazon's streaming investment thesis centers on Prime Video's unique ecosystem integration, creating structural advantages over standalone services. Unlike subscription-dependent models, Prime Video leverages cross-subsidization from profitable retail and cloud operations, enabling aggressive content spending without immediate profitability pressure. This allows competitive bidding for premium content while offering streaming essentially "free" within Prime membership.Prime Video's recent content pipeline demonstrates strategic diversity. The upcoming slate includes Shiny Happy People: A Teenage Holy War, Sausage Party: Foodtopia, Hotel Costiera starring Jesse Williams, and the documentary series Simple Plan: The Kids In The Crowd. This programming spans multiple genres across 240+ territories, creating broad demographic appeal while leveraging Amazon's global distribution infrastructure. The company's retail transaction data enables premium targeting capabilities, commanding higher ad rates than traditional streaming platforms. With advertising revenues reaching $13.9 billion and growing 19% year over year, this monetization potential extends directly to Prime Video's inventory.Integration across Alexa, Fire TV devices, and the broader Amazon ecosystem creates multiple content discovery touchpoints, enhancing user engagement. Amazon's $25.9 billion free cash flow provides sustained investment capacity for content acquisition and original production.The Zacks Consensus Estimate for 2025 earnings is pegged at $6.17 per share, which indicates a jump of 11.57% from the year-ago period.Amazon.com, Inc. Price and Consensus Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. QuoteValuation and Price Performance ComparisonBoth stocks trade at premium valuations reflecting their market leadership positions and growth prospects. Netflix trades at 44x forward earnings, while Amazon commands a similar premium of 32.09x across its diversified business segments. However, Netflix's more focused business model offers greater transparency and predictability in financial forecasting, potentially leading to multiple expansions as advertising and other initiatives gain traction.NFLX vs. AMZN: P/E F12M RatioImage Source: Zacks Investment ResearchNetflix's recent price performance reflects investor confidence, with shares climbing 37.1% year to date, outperforming Amazon, which lost 3.1%. Netflix's pure-play exposure to the streaming market provides more direct upside leverage to cord-cutting trends and global streaming adoption. Amazon's diversification offers stability but may limit the impact of streaming success on overall valuation, given AWS and retail's larger revenue contributions.NFLX Outperforms AMZN in YTDImage Source: Zacks Investment ResearchConclusionNetflix emerges as the superior choice for investors seeking upside potential. Netflix's focused streaming strategy, combined with early-stage advertising monetization and innovative content approaches, provides clearer paths to accelerated growth. The company's operating leverage model means that incremental revenue gains flow more directly to profitability. Additionally, Netflix faces fewer regulatory headwinds than Amazon's sprawling empire, while its global content investments and live events strategy create differentiated value propositions. For investors willing to embrace a pure-play streaming bet, Netflix offers better risk-adjusted upside potential in the evolving entertainment landscape. NFLX and AMZN currently carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. 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