Netflix’s third quarter saw a negative market reaction, with management attributing the underperformance in profit to an unexpected Brazilian tax expense that impacted operating income. Co-CEO Gregory Peters explained, “Absent the Brazilian tax matter, we would have exceeded our Q3 2025 operating income and operating margin forecast.” The company nonetheless highlighted strong engagement, including its best ad sales quarter ever and record share of TV viewing time in the US and UK, driven by content hits like K-Pop Demon Hunters and live events such as the Canelo Crawford fight. Management described these as indicators of continued competitive progress, despite the margin compression this quarter.
Is now the time to buy NFLX? Find out in our full research report (it’s free for active Edge members).
Netflix (NFLX) Q3 CY2025 Highlights:
- Revenue: $11.51 billion vs analyst estimates of $11.52 billion (17.2% year-on-year growth, in line)
- EPS (GAAP): $5.87 vs analyst expectations of $6.97 (15.8% miss)
- Adjusted EBITDA: $3.42 billion vs analyst estimates of $3.79 billion (29.7% margin, 9.9% miss)
- Revenue Guidance for Q4 CY2025 is $11.96 billion at the midpoint, roughly in line with what analysts were expecting
- EPS (GAAP) guidance for Q4 CY2025 is $5.45 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 28.2%, down from 29.6% in the same quarter last year
- Global Streaming Paid Memberships: 317.3 million, up 34.56 million year on year
- Market Capitalization: $464.4 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Netflix’s Q3 Earnings Call
- Ben Swinburne (Morgan Stanley) asked about the business’s overall health and future opportunity. Co-CEO Gregory Peters responded that Netflix remains healthy, highlighting engagement and ad revenue progress, while acknowledging ongoing work required to realize long-term opportunities.
- Steve Cahall (Wells Fargo) pressed for details on the Brazilian tax expense’s impact on results. CFO Spencer Neumann clarified it was a non-recurring item and does not expect future material impact, noting, “Absent this expense, we would have exceeded our Q3 operating margin forecast.”
- Jason Helfstein (Oppenheimer) inquired about the sustainability of advertising growth and whether it could double again. Peters refrained from offering specific guidance but emphasized strong fundamentals and continued ad business momentum.
- Dan Kurnos (Benchmark Company) questioned the strategic rationale for the Spotify podcast partnership. Peters described it as a curated co-exclusive video content deal, broadening Netflix’s entertainment offering beyond films and series.
- Jessica Ehrlich (Bank of America) asked about M&A strategy amid industry consolidation. Co-CEO Theodore Sarandos said Netflix will be selective, focusing on organic growth and only considering deals that strengthen its entertainment offering or accelerate strategic goals.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be closely monitoring (1) continued adoption and monetization of Netflix’s ad-supported plans, (2) engagement trends driven by the upcoming slate of original series and live events, and (3) the impact of new interactive features and gaming initiatives on user retention. Progress on leveraging AI for product and content innovation will also be a key area of focus.
Netflix currently trades at $1,095, down from $1,241 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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