Executive Summary

Q3 revenue grew 17% to $11.51B, essentially in line with consensus and guidance; EPS was $0.587 (split-adjusted), missing consensus $0.697 as an unforecasted ~$619M Brazil non-income tax expense in cost of revenue reduced operating margin by >5 pts and lowered EPS by ~$1 (pre-split $5.87 vs split-adjusted $0.587) (consensus data from S&P Global*).
Operating margin was 28.2% vs. 31.5% guided due to the Brazil tax matter; absent this, management said Q3 operating margin and operating income would have exceeded plan .
Q4 outlook: revenue ~$11.96B (+17% y/y) and operating margin 23.9%; full-year 2025 revenue guided to $45.1B (16% y/y) and operating margin reduced to 29% (from 30% prior) due to the tax item; 2025 FCF raised to ~ $9B from $8.0–$8.5B .
Strategic momentum: record US/UK TV view share, best ad sales quarter ever, and stronger live events (Canelo vs. Crawford the most-viewed men’s championship fight this century); a 10-for-1 stock split was announced post-quarter (Oct 30) as an employee accessibility measure .

What Went Well and What Went Wrong

What Went Well

“We recorded our best ad sales quarter ever and doubled our commitments in the US upfront,” with the ads business “on track to more than double” in 2025; programmatic demand is growing faster than upfront as the Netflix Ads Suite scales .
Engagement strength: highest quarterly TV view share ever in the US (8.6%) and UK (9.4%); major content hits (e.g., Wednesday S2; Happy Gilmore 2) and live events (Canelo vs. Crawford) supported acquisition and conversation .
Cash generation: Q3 operating cash flow $2.83B and FCF $2.66B; FY25 FCF outlook raised to ~ $9B on timing and lower content spend .

What Went Wrong

Operating margin (28.2%) fell short of the 31.5% guide due to a ~$619M Brazil non-income tax expense (CIDE) booked in cost of revenues; management emphasized it’s not an income tax, 20% related to 2025, and does not expect a material ongoing impact .
EPS miss vs. consensus (actual $0.587* vs. $0.697* estimate) largely from lower operating income tied to the tax item; EBITDA also trailed consensus (actual $3.34B* vs. $3.79B* estimate) (S&P Global*).
FY25 operating margin reduced to 29% (from 30% reported basis previously) given the Brazil tax impact, though revenue guidance remains intact .

Financial Results

Core P&L vs. prior periods and estimates

Metric	Q3’24	Q2’25	Q3’25 Actual	Q3’25 Consensus*	Surprise
Revenue ($B)	$9.83	$11.08	$11.51	$11.51*	-$0.00B (~-0.01%)*
Operating Income ($B)	$2.91	$3.78	$3.25	N/A	N/A
Operating Margin (%)	29.6%	34.1%	28.2%	N/A	N/A
Net Income ($B)	$2.36	$3.13	$2.55	N/A	N/A
Diluted EPS (split-adjusted)	$0.540	$0.719	$0.587	$0.697*	-$0.110 (~-15.8%)*

Notes: EPS shown split-adjusted for comparability with consensus. The 10-for-1 split was announced 10/30/25; results above reflect split-adjusted EPS figures for comparison (S&P Global* for consensus and actual EPS used in consensus row).

Cash Flow and Balance Sheet KPIs

Metric	Q3’24	Q2’25	Q3’25
Net Cash from Operating Activities ($B)	$2.32	$2.42	$2.83
Free Cash Flow ($B)	$2.19	$2.27	$2.66
Gross Debt ($B, period-end)	—	$14.45	$14.46
Cash & Equivalents ($B, period-end)	—	$8.18	$9.29
Net Debt (Non-GAAP, $B)	—	$6.12	$5.20
Shares FD (M)	437.9	434.9	434.0

Regional Revenue Breakdown

Region Revenue ($B)	Q3’24	Q2’25	Q3’25
UCAN	$4.32	$4.93	$5.07
EMEA	$3.13	$3.54	$3.70
LATAM	$1.24	$1.31	$1.37
APAC	$1.13	$1.31	$1.37

Engagement/Ad KPIs (select)

KPI	Q3’25
US TV View Share	8.6%
UK TV View Share	9.4%
Ads Business	“Best ad sales quarter ever”; on track to “more than double” 2025 ads revenue

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q4’25	—	~$11.96B	New
Operating Margin	Q4’25	—	23.9%	New
Revenue	FY 2025	$44.8–$45.2B (Q2’25)	$45.1B	Maintained/Narrowed
Operating Margin	FY 2025	~30% reported / 29.5% FX-NEU (Q2’25)	29% (reported & FX-NEU)	Lowered
Free Cash Flow	FY 2025	~$8.0–$8.5B (Q2’25)	~ $9B (+/− few hundred $M)	Raised
Ads Revenue	FY 2025	“Roughly double” (Q2’25)	“More than double”	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1–Q2 2025)	Current Period (Q3 2025)	Trend
Advertising scale & monetization	Rollout of Netflix Ads Suite; target to roughly double 2025 ad revenue	Best ad sales quarter ever; on track to more than double ads revenue; programmatic growth outpacing upfront; adding Amazon DSP/AJA; interactivity formats in Q4	Improving momentum
Live events & sports	Building live ops; WWE weekly; Taylor vs. Serrano 3; NFL Christmas Day games	Canelo vs. Crawford “most-viewed” men’s championship fight this century; live events drive acquisition/engagement; upcoming Jake Paul vs. Tank Davis; NFL Xmas doubleheader	Strengthening
AI/product innovation	Redesigned TV UI rollout; ad tech suite; ML/AI long history	GenAI for recommendations, localization, creator tools; conversational search beta; ad creative optimization	Expanding use cases
Content slate performance	Q1/Q2 hits across geographies; strong second-half slate expected	Record view share in US/UK; major hits (Wednesday S2, Happy Gilmore 2); franchise building (KPop Demon Hunters)	Broad-based strength
Regulatory/legal	—	Brazil CIDE tax expense (~$619M) recorded in CoR; not income tax; >5 pt margin impact; not expected to be material ongoing	One-off headwind
M&A/industry consolidation	Organic-first; selective M&A; no interest in legacy networks (ongoing stance)	Builders not buyers; choosy; consolidation not a fundamental competitive shift	Unchanged discipline

Management Commentary

“Operating income would have exceeded our forecast absent the Brazilian tax matter… We don’t expect this matter to have a material impact on our results in the future.” — Management letter
“We recorded our best ad sales quarter ever and doubled our commitments in the US upfront… on track to more than double our ads revenue in 2025.” — Management letter
“In Q3, we achieved our highest quarterly view share ever in the U.S. at 8.6%, and in the UK at 9.4%.” — Co-CEO (call)
“Canelo vs. Crawford was the most viewed men’s championship fight of the century… These events typically have outsized positives for conversation and acquisition.” — Co-CEO (call)
“The Contribution for Intervention in Economic Domain… is not an income tax… we recorded the expense as a component of our cost of revenues… absent this expense, we would have exceeded our Q3 2025 operating income and operating margin forecast.” — CFO (call)

Q&A Highlights

Brazil tax expense: CFO detailed the CIDE non-income tax nature, coverage of 2022–Q3’25 periods, ~20% attributable to 2025, and classification in cost of revenues; reiterated minimal expected future impact .
2026 framing: Company will issue full-year 2026 guidance on the January call; financial objectives unchanged (sustain revenue growth, expand margins, increase FCF) .
Ads trajectory: Upfront commitments more than doubled; programmatic growing even faster; rollout of ad tech stack supports more formats/measurement and improving fill rates .
Live/events economics: Live events deliver “differential value” (acquisition, engagement) with outsized impact despite small share of total viewing; more marquee events slated (Jake Paul vs. Tank; NFL Christmas) .
M&A stance: Remains selective; consolidation doesn’t change competitive reality; no interest in legacy media networks .

Estimates Context

Q3 vs. Street: Revenue essentially in line ($11.51B actual vs. $11.51B estimate*), EPS missed ($0.587 actual vs. $0.697 estimate*), and EBITDA missed ($3.34B actual* vs. $3.79B estimate*), with the Brazil tax item the key driver of the miss (S&P Global*; company commentary) .
Q4 setup: Company guides revenue to ~$11.96B, roughly in line with consensus $11.97B*; no EPS guidance provided (S&P Global*; company guidance) .
FY25: Revenue guide $45.1B aligns with consensus ~$45.09B*; operating margin lowered to 29% due to Brazil tax; FCF raised to ~ $9B (S&P Global*; company guidance) .

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

The EPS/margin miss is isolated to a non-income Brazilian tax expense booked in CoR; absent this, operating performance would have exceeded guidance—limiting read-through to core fundamentals .
Demand and monetization engines are working: record view share, strong slate, and accelerating ads (best quarter; “more than double” 2025) support medium-term revenue durability .
FY25 operating margin trimmed to 29% on the tax item, but revenue guide intact and FCF increased to ~$9B—supporting sustained buybacks and balance sheet strength (net debt ~$5.2B) .
Q4 guide implies continued solid top-line (+17% y/y) but seasonally lower margins (23.9%); focus near-term on execution in ads/programmatic and holiday slate performance .
Live programming is proving to be an effective acquisition and engagement lever; watch the cadence and economics of marquee events into 2026 (e.g., NFL Christmas, global events pipeline) .
Strategic discipline remains: organic-first growth, targeted M&A only; consolidation elsewhere not seen as a structural threat .
Post-quarter 10-for-1 stock split enhances employee equity accessibility; watch for potential retail/inclusion effects but not a fundamental driver .

Additional Items and Sources

Q3 2025 shareholder letter (8-K Item 2.02 furnished) includes detailed P&L, cash flow, regional revenue, and guidance .
Q3 2025 earnings call transcript provides color on Brazil tax, ads, live events, AI/product, and M&A .
Related press releases: Canelo vs. Crawford commercial distribution partnership (Sept 3) ; 10-for-1 stock split (Oct 30) .
Prior quarters for trend: Q2 2025 shareholder letter (revenue +16% y/y; guide framework) ; Q1 2025 shareholder letter (initial 2025 guidance stance; live/ads/product updates) .

S&P Global consensus and actuals used in “Estimates Context” and consensus columns/rows are marked with * and sourced from S&P Global.

NETFLIX INC (NFLX)·Q3 2025 Earnings Summary