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Netflix is streaming sharply lower following its Q3 report, which delivered a rare EPS miss despite in-line revenue and modestly better-than-expected Q4 guidance.

• Revenue rose 17.2% yr/yr to $11.51 bln, marking the strongest top-line growth since 2Q21. Growth was driven by membership additions, pricing changes, and rising ad revenue.
• EPS came in below expectations, but was impacted by a Brazilian gross tax on outbound payments. Excluding this one-time item, Netflix would have exceeded its Q3 operating income and margin forecast. The company does not expect this tax to materially affect results going forward.
• The advertising segment was a bright spot. NFLX reaffirmed expectations for ad revenue to double in 2025. Its Ads Suite is now fully deployed across all ad markets.
• Netflix teased further ad business enhancements in 2026, with a pivot to data-focused investments in 2027.
• Engagement was a concern last quarter and we are not sure Netflix eased those concerns. Netflix said Q3 view hours grew slightly faster then 1H25 and marked its highest quarterly view share in the US and UK, though no specific Q3 hours data was provided.
• On the content side, KPop Demon Hunters was a breakout hit and is now Netflix's most popular original animated film ever. The company signed toy licensing deals with Mattel and Hasbro to capitalize on demand. The return of Wednesday also contributed to strong viewership. Q4 will feature a major slate of new films and the much-anticipated final season of Stranger Things.
• Netflix also announced last week it expanded into podcasting through a new deal with Spotify, offering curated top video podcasts to broaden its entertainment ecosystem.

Briefing.com Analyst Insight:

Netflix's Q3 report is a bit of a mixed bag. Revenue growth was robust, and the ads business continues to gain momentum, highlighted by plans to double revenue in 2025. The Spotify and toy licensing deals are strategically sound and support brand expansion. However, the rare EPS miss (even if tax-related) caught investors off guard, and engagement metrics underwhelmed. View hours increased modestly from 1H25, but we would have preferred more data. Overall, while NFLX still leads in streaming scale and ad innovation, questions about viewer engagement and valuation still linger for us.