NETFLIX 3Q Earnings Analysis Report
Underlying beat but headline EPS miss on tax - outlook intact and still accelerating revenue growth
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Model: Gemini 2.5 PRO
Date: 21 Oct 2025
Here is the requested equity research analysis for Netflix (NFLX) based on its Q3 2025 results.
Stock: $NFLX (Netflix, Inc.)
Quarter: Q3 2025
Result: Mixed - Headline Miss, Underlying Beat
1. Executive Summary
Netflix reported a mixed Q3 2025 result. Revenue met consensus, while EPS posted a significant miss1. However, this miss was entirely attributable to a large, one-off $619 million expense related to a Brazilian tax dispute22.
Excluding this charge (approx. $1.43/share), “core” EPS would have been ~$7.30, handily beating the $6.97 consensus.
The underlying business fundamentals appear exceptionally strong:
Growth: Revenue growth accelerated to 17.2% YoY (from 15.9% in Q2)3.
Advertising: Management reported the “best ad sales quarter ever” and a doubling of US upfront commitments4444.
Engagement: Achieved its highest-ever quarterly view share in both the US and UK55.
Franchise Development: KPop Demon Hunters became its most popular film ever 66and is being expanded into a global franchise with new toy licensing deals with Mattel and Hasbro7.
Cash Flow: Full-year 2025 Free Cash Flow (FCF) guidance was raised to approximately $9B (up from $8B-$8.5B)8888.
Guidance for Q4 is in line with consensus for both revenue and EPS9. While management lowered the full-year 2025 operating margin target to 29% (from 30%)1010, this was solely to reflect the tax charge.
Conclusion: This was a high-quality operational beat masked by a one-off charge. The acceleration in revenue, record ad sales, and upgraded FCF guidance signal a positive underlying trajectory. Analysts will be forced to lower 2025 GAAP EPS estimates to account for the tax charge, but the strong “core” performance supports a positive outlook for 2026.