The pseudo-retirement of Reed Hastings, who handed off his co-C.E.O. title to Greg Peters last week, confirms what was already obvious for much of the past two years: Netflix is evolving again. When Hastings took over from Marc Randolf in 1998, it was in large part because he didn’t believe Randolf could scale the company. Under Hastings, Netflix transitioned from a DVD rental outfit to a cutting-edge streaming company, vanquishing retailers like Blockbuster, bleeding the cable companies, and growing to rival Disney. Netflix became 4x Warner Bros. Discovery faster than HBO could become HBO Max.

Of course, Netflix’s challenges as the market incumbent are vastly different from when it was a scrappy disruptor. The company must continue to scale globally, but just as important these days is maximizing revenue per user, building out an advertising network, and cracking down on the password-sharing that has accustomed an entire generation to endless on-demand content for free. Netflix’s subscriber growth was effectively flat in 2022, and its U.S. market is especially tapped out. Saturation isn’t a new issue, but it does raise questions about the level of spending required to win net new subscribers. 

For all the naysaying about Netflix over the past year, as Wall Street reconsidered streaming and its stock swooned, the company still has core advantages. It’s the only majorly profitable service, and it’s the only streaming-first company that’s generating significant free cash flow. It also has far less debt—and it’s fixed rate debt!—than any of its competitors. After all, while the Netflix executive shakeup grabbed the headlines, the company’s most recent earnings report tells the real story of where the streamer is headed in ’23 and beyond.