Netflix (Nasdaq: NFLX | NFLX Price Prediction) reported Q3 earnings after the bell today. Shares of Netflix were up 61% in the past year, headed into today’s earnings, so the company faced lofty expectations. The initial headline that hit newswires when Netflix reported certainly looked very bad. The company reported EPS of $5.87 versus Wall Street’s expectations of $6.95 in EPS.
Yet, as Netflix clarified in its shareholder letter, a big reason for that EPS shortfall was a tax dispute with Brazilian authorities. Overall, operating income appears on track, and expenses related to that tax dispute are a one-time figure.
In Q4, Netflix projects $11.96 billion in revenue, which is slightly above Wall Street’s expectations of $11.9 billion. Overall, these weren’t bad earnings by any stretch, and certainly weren’t as bad as the company’s EPS miss might have looked when earnings first hit newswires.
Yet, as we noted at the beginning, with shares up 61% in the past year, expectations are high. Netflix merely matched Wall Street’s revenue expectations last quarter, delivering $11.51 billion in revenue. That’s certainly disappointing for a company that’s topped EPS expectations in 14 out of the last 16 quarters headed into today’s earnings.
Here are more details from our live blog covering Netflix’s earnings.
NFLX | Netflix Q3’25 Earnings Highlights:
- Adj. EPS: $5.87 [✅]; Misses Wall St Expectations of $6.95
- Revenue: $11.51B (Est. $11.51B) [✅]; [UP] +17.2% YoY
- Adj. Gross Margin: 28.2% [⚠️]; [DOWN] -50 bps YoY
- Net Income: $2.55B [✅]; [UP] +8% YoY
- Operating Income: $3.25B (Est. $3.25B) [✅]; [UP] +12% YoY
- Free Cash Flow: $2.66B; [UP] +21% YoY
- Effective Tax Rate: 18.1% (vs. 12.6% YoY)
Q4’25 Outlook:
- Revenue: $11.96B (Est. $11.9B) [✅]
- Expected revenue growth of 17% driven by growth in members, pricing, and ad revenue.
- Projected operating margin of 23.9%, a two percentage point year-over-year improvement.
Q3 Segment Performance:
- UCAN Revenue: $5.07B (Est. $5.07B) [✅]; [UP] +17% YoY
- EMEA Revenue: $3.70B (Est. $3.70B) [✅]; [UP] +18% YoY
- LATAM Revenue: $1.37B (Est. $1.37B) [✅]; [UP] +10% YoY
- APAC Revenue: $1.37B (Est. $1.37B) [✅]; [UP] +21% YoY
Other Key Q3 Metrics:
- Adj. Operating Income: $3.25B (Est. $3.25B) [✅]; [UP] +12% YoY
- Adj. Operating Expenses: $8.26B (Est. $8.26B) [✅]; [UP] +10% YoY
- R&D Expenses: $853.58M (Est. $853.58M) [✅]; [UP] +16% YoY
- Net Cash Provided by Operating Activities: $2.83B; [UP] +22% YoY
- Shares Outstanding: 434.0M
- Gross Debt: $14.46B
- Cash and Cash Equivalents: $9.29B
CEO Commentary:
- Greg Peters: “We’re finishing the year with good momentum and have an exciting Q4 slate, including the final season of Stranger Things and new seasons of The Diplomat and Nobody Wants This.”
CFO Commentary:
- Spence Neumann: “Our primary financial metrics are revenue for growth and operating margin for profitability. We strive for accuracy in our guidance.”
Other Executives:
- Ted Sarandos, Co-CEO: “Engagement remains healthy, and we hit our highest quarterly view share ever in the US and UK.”
- Spencer Wang, VP of Finance & Capital Markets: “We are now on track to more than double our ads revenue in 2025.”
Netflix On K-Pop Demon Hunters
“We’re only in our second decade of original programming. We started without any of our own IP so we’ve had to learn how to build major franchises, like Stranger Things and Squid Game, from scratch. KPop Demon Hunters, which is now our most popular film ever (325M views), is another example of our ability to create large breakout hits and for our films to be part of the cultural conversation and zeitgeist.
HUNTR/X became the first K-pop girl group to reach #1 on Billboard’s Hot 100, the album recently went platinum, and characters from the film are the top 5 most-searched Halloween costumes. We are actively expanding the KPop Demon Hunters universe, bringing fans new experiences and products worldwide.
Earlier today, we announced Mattel and Hasbro have each been named a global co-master toy licensee for KPop Demon Hunters. These unprecedented licensing partnerships will help meet the massive fan demand for toys and games inspired by this smash hit. We continue to release apparel on the Netflix Shop and at leading retailers like Amazon, Zara, Target, Gap, Old Navy, and Hot Topic. And we’re excited about incremental opportunities for KPop Demon Hunters in live experiences, publishing, beauty, lifestyle, and food and beverage.”
Earnings Pros and Cons
Pros
- Guidance for next quarter looks solid with revenue slightly ahead of Wall Street
- Cash flow last quarter was solidly ahead of expectations
Cons
- Last quarter was a big EPS miss (caused by Brazilian tax dispute)
- Revenue last quarter met Wall Street expectations – investors would have liked to see a larger Q3 revenue beat
Netflix’s Earnings Call Is Happening Now
You can watch it in the embedded player below:
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