TLDR
- Netflix Q3 revenue reached $11.51 billion, missing the $11.52 billion analyst consensus and company guidance of $11.53 billion.
- Earnings per share of $5.87 fell short of the $6.94 Wall Street forecast and Netflix’s own $6.87 projection.
- Operating margin came in at 28% versus the 31.5% target, impacted by a Brazilian tax dispute expense.
- Q4 revenue guidance of $11.96 billion exceeded analyst expectations of $11.90 billion, with EPS forecast at $5.45 versus $5.42 estimates.
- Shares dropped more than 6% in premarket trading despite the stock climbing 40% year to date.
Netflix shares fell over 6% in premarket trading Wednesday after third-quarter earnings came in below Wall Street projections. The streaming platform reported revenue of $11.51 billion, missing both the $11.52 billion analyst estimate and its own $11.53 billion guidance.
Earnings per share landed at $5.87, below the $6.94 analyst consensus and the company’s $6.87 internal forecast. The results compare to $9.82 billion in revenue and $5.40 per share in the year-ago quarter.
The earnings shortfall stems largely from an unexpected expense related to a Brazilian tax authority dispute. Operating margin hit 28%, falling short of the company’s 31.5% target.
Netflix stated it would have exceeded margin expectations without the tax charge. The company doesn’t anticipate the issue materially affecting future performance.
Strong Q4 Guidance Offers Relief
Looking ahead, Netflix provided fourth-quarter guidance that topped expectations. The company projects revenue of $11.96 billion, above the $11.90 billion Wall Street estimate.
Earnings per share are forecast at $5.45, beating analyst projections of $5.42. For full-year 2025, Netflix expects revenue of $45.1 billion, near the high end of its previous guidance range.
The Brazilian tax matter resulted in a one-time catch-up charge in Q3 plus an ongoing quarterly expense of just over $40 million. That represents roughly half a percent of Netflix’s total expense base.
Full-year operating margin guidance now stands at 29%, down from the previous 30% outlook. JPMorgan lowered its price target to $1,275 from $1,300 while keeping a neutral rating on the stock.
Content Performance and Ad Revenue Growth
The streaming service reported healthy engagement driven by a strong Q3 content slate. The Canelo vs. Crawford fight attracted over 41 million global viewers, becoming the most-watched men’s championship boxing match of the century.
“KPop Demon Hunters” set a new record as Netflix’s most-viewed film ever with 325 million views. The $7.99 ad-supported tier delivered the company’s strongest ad sales quarter to date.
Ad revenue is projected to more than double in 2025 from $1.4 billion to $2.9 billion, with JPMorgan forecasting another 45% jump to $4.2 billion by 2026. Netflix expanded its advertising reach through a new Amazon DSP integration starting this quarter.
The company announced a video podcast partnership with Spotify, bringing shows like “The Bill Simmons Podcast” and “The Rewatchables” to Netflix in early 2026. Revenue growth in Asia-Pacific and Latin America each decelerated by about 300 basis points to 20%.
JPMorgan attributed the slowdown to higher churn in Asia-Pacific after “Squid Game” and foreign exchange headwinds. Despite regional challenges, advertising revenue continues tracking ahead of internal projections.
Netflix shares have gained 40% year to date but trade at approximately 45 times forward earnings. Warner Bros. Discovery revealed Tuesday it received unsolicited acquisition interest, with Netflix mentioned as a potential buyer.
The company clarified on its earnings call it has no interest in acquiring legacy media networks. Netflix recently faced criticism from Elon Musk, who encouraged subscription cancellations over content concerns.
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