The streaming giant is now firing off a lot of free cash

Longtime free cash flow burner Netflix (NFLX) is now showing investors a different story.

Netflix generated a whopping $2.1 billion in free cash flow in the first quarter, which flew somewhat under the radar in its latest earnings release late Tuesday.

Free cash flow is operating cash flow minus capital expenditures. A company essentially hits the free cash flow mark by being profitable and investing those profits prudently into “stuff” like plants and equipment. The cash left over could then be used to further bolster the total return potential for investors by way of stock buybacks or dividend increases.

Netflix has long shown negative reads — or outflows — on the free cash flow line, in part reflecting aggressive investments into its business and a focus on low prices (which produced losses).

In this photo illustration, the American global streaming media provider Netflix logo is seen on an Android mobile device screen with the currency of the United States dollar. (Photo Illustration by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)

Recall that from 2015 to 2019, Netflix had a negative cash outflow of $10.5 billion. The company went free cash flow positive in 2020 with $1.9 billion in free cash as the COVID-19 pandemic fueled bumper profits. The company then posted a $132 million free cash outflow in 2021, followed by $1.6 billion in free cash flow in 2022.

But the dynamic has now begun to consistently turn at the company, improving the free cash flow outlook. In part, it reflects a better-run, more mature business.

The company is reeling in content spending, for one.

Execs told analysts on the earnings call it plans to spend about $16 billion on content this year, down from a prior forecast of $17 billion.

Meanwhile, Netflix continues to move away from its rock-bottom pricing roots to improve its profit line.

Netflix raised its subscription prices in 2022 and is actively rolling out technology to support paid password sharing, which has the effect of a price hike.

In turn, Netflix raised its 2023 free cash flow guidance to “at least” $3.5 billion from $3 billion previously. It used $400 million in the first quarter to buy back stock and signaled more repurchases were on the way.

“Share repurchases will accelerate over the course of the year,” Netflix CFO Spencer Neumann said.

And Wall Street is beginning to sniff out Netflix as a cash flow play.

“Fundamentals are clearly and materially improving. And Q1 results did contain two ‘value catalysts’ — Netflix increased its 2023 free cash flow outlook from $3.0 billion plus to $3.5 billion plus (with cash content spend now likely down near $16 billion for the year), and the company bought back stock ($400 million) for the first time in well over a year and committed to accelerating share repos throughout 2023,” EvercoreISI analyst Mark Mahaney highlighted in a client note.

“Financially, we continue to see Netflix generating a 20%ish premium EPS growth algorithm,” Mahaney added, “based on 10%-15% revenue growth (evenly driven by subscribers and average revenue per user), operating margin expansion (100 bps per year), and share repos.”

And all of that is welcome news seeing as Netflix’s profit guidance is making some investors switch off their trading screens.

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email [email protected]

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance