When Stock Splits Align with Growth: Netflix and ServiceNow in Focus

The Timing Behind Recent Share Restructuring

Stock splits typically emerge after substantial price appreciation, reflecting confidence in underlying business strength. Netflix [(NASDAQ: NFLX)] and ServiceNow [(NYSE: NOW)] exemplify this pattern. Over the past decade, both stocks have delivered nearly 900% returns, setting the stage for their recent and forthcoming share restructuring initiatives.

Netflix executed a 10-for-1 split on Monday, bringing share prices from above $1,000 down to approximately $114, making equity ownership more accessible to a broader investor base. ServiceNow’s board has authorized a five-for-one split pending shareholder approval at a December 5 special meeting. While these splits carry no inherent impact on business fundamentals, they coincide with meaningful operational momentum at both organizations.

Netflix’s Advertising Evolution Powers Growth Trajectory

Netflix’s latest quarter demonstrates the streaming leader’s diversified revenue generation. Revenue climbed 17% year-over-year to $11.5 billion, fueled by subscriber expansion, pricing optimization, and—notably—a burgeoning advertising segment that’s reshaping the company’s long-term growth profile.

The stock currently trades at roughly 48 times earnings and 11 times sales, representing a premium valuation typical of high-growth media enterprises. The critical question: can management sustain double-digit revenue expansion while simultaneously widening operating margins? Historical performance suggests this remains achievable, provided content costs remain disciplined and the advertising platform continues accelerating.

ServiceNow’s AI-Driven Momentum Strengthens Business Resilience

ServiceNow’s third-quarter results underscore the company’s positioning as a beneficiary of artificial intelligence transformation. Subscription revenue reached $3.3 billion, up 22% year-over-year, with total revenue matching that growth rate to $3.4 billion. The company’s remaining performance obligations—a proxy for contracted future revenue—climbed 21% to approximately $11.4 billion, indicating a robust sales pipeline.

Free cash flow generation improved 18% year-over-year to $592 million, affording management flexibility to deepen AI investments without sacrificing margin expansion. The company projects AI-related products will generate over $500 million in annual contract value this year, escalating beyond $1 billion in the coming year.

ServiceNow’s forward price-to-earnings multiple of 41 warrants scrutiny, yet appears justified given the company’s growth velocity and enterprise AI positioning. The challenge, as with Netflix, centers on sustaining near-term momentum against potential macro headwinds.

The Valuation Equation and Risk Considerations

Both companies carry meaningful valuation premiums that demand continued execution. Netflix faces relentless competition for viewer attention and mounting content expenditures. ServiceNow remains concentrated within large enterprise and government procurement cycles, exposing it to budget contraction during economic uncertainty.

For investors, the core risk remains straightforward: elevated valuations amplify downside volatility if either company falters in delivering sustained double-digit growth across both revenue and profitability metrics.

Investment Perspective for Long-Term Holders

For risk-tolerant investors with multi-year time horizons, both businesses represent compelling opportunities. The share restructuring events themselves carry symbolic weight—signaling management confidence in sustained growth—though they materially alter neither valuation nor investment thesis.

Conservative investors uncomfortable with volatility may prudently sideline these opportunities. However, those positioning for decade-long ownership in transformative technology and business services platforms may find measured positions warrant consideration.