Netflix profitability falls: investors react with share sell-off – analysis of Q3 2025 results

Falling margins and a lack of transparency in advertising revenue data have heightened investor caution. Even Netflix’s strong financial position has not prevented a share price decline.

Netflix, Inc. (NASDAQ: NFLX) released its Q3 2025 results, which met revenue forecasts but came in weaker on profit. Revenue reached 11.51 billion USD, up 17% year-on-year. However, the operating margin narrowed to 28.2% due to a one-off charge of 619 million USD linked to a tax dispute in Brazil. Earnings per share were 5.87 USD – 9% higher than a year earlier but below the company’s own expectations.

The key growth drivers during the quarter were higher subscription prices, strong user engagement and record advertising sales. Yet Netflix still does not disclose the exact size of its ad revenue, making performance in this segment less transparent.

For Q4 2025, management expects revenue of around 11.96 billion USD – up 17% year-on-year – and an operating margin of 23.9%, two percentage points higher than a year earlier.

For the full year 2025, the company forecasts revenue of about 45.1 billion USD (+16% y/y) and an operating margin of 29%, slightly below the previous expectation of around 30%. The outlook for free cash flow has been raised to 9 billion USD from 8.0–8.5 billion USD earlier.

Investor reaction to Netflix’s Q3 2025 report was sharply negative: shares fell by almost 10% on the first trading day after publication. The decline reflected disappointment with profitability and margins rather than revenue figures. Investors had expected the company to maintain stronger margins near 30%, but the unexpected Brazilian tax charge weighed on results, and the new Q4 margin forecast of 23.9% appeared weaker than anticipated.

Additionally, the absence of concrete advertising revenue figures unsettled the market. Although Netflix reported record ad sales and expanding partnerships, investors interpreted the lack of detail as a sign that the advertising business still has limited impact on overall financial performance.

This article examines Netflix, Inc., reviewing reports for Q2, Q3, Q4 2024 and Q1, Q2, Q3 2025, and includes a technical analysis of NFLX shares on which the 2025 forecast for Netflix, Inc. stock is based.

About Netflix, Inc.

Netflix, Inc. was founded on 29 August 1997 by Reed Hastings and Mark Randolph. The company was initially in the business of delivering DVDs on a subscription basis. Clients could order a film through the website and receive it by post. In 2007, Netflix launched a streaming service, allowing users to watch movies and TV shows online via the internet.

The transition to live streaming was pivotal in the company’s history. Netflix began actively expanding its content library to include licensed films, series, and original projects. By July 2024, Netflix had 277 million subscribers worldwide, making it the largest streaming platform.

Netflix, Inc.’s key financial flows

Netflix’s revenue mainly comes from streaming services, advertising, and other sources. The main components are outlined below:

• Subscription fees: this is Netflix’s primary revenue stream, which is divided into ad-supported and ad-free subscriptions
• Advertising revenue: payments from companies for placing advertisements
• Content licensing and distribution: revenue is generated from providing paid licences for Netflix’s original and purchased content to other platforms and TV channels. This segment also includes income from partnerships with telecommunication providers, cable companies, and other distributors that offer Netflix as part of their packages
• Other revenue streams: sales of merchandise related to Netflix series and films (e.g. toys, apparel, and collectables). The company has also started investing in the gaming industry by offering mobile games based on its intellectual property, creating additional opportunities for revenue growth

Most of Netflix’s revenue is derived from streaming subscriptions, while advertising, licensing, and other business segments offer additional potential for income growth.

Netflix, Inc. Q2 2024 earnings results

Netflix released its Q2 2024 report on 18 July. Below is a comparison of its results with the same period in 2023:

• Revenue: 9.56 billion USD (+17%)
• Net income: 2.15 billion USD (+44%)
• Earnings per share: 4.88 USD (+48%)
• Operating profit: 2.60 billion USD (+44%)
• Operating margin: 27.2%​ (+490 basis points)
• Total subscribers: 277.65 million (+16%)

Although the company continues to increase the number of subscribers quarter over quarter, this growth is gradually slowing. The increase in memberships in Q4 2023 surpassed previous figures by 13.13 million, followed by 9.32 million in Q1 2024 and 8.05 million in Q2 2024. Netflix is facing challenges in identifying new catalysts for subscriber growth. The company is now attracting new subscribers by addressing password sharing and reducing the cost of ad-supported subscription plans. Market participants are sensitive to these statistics; a look at the stock behaviour when Netflix reported a loss of 200 thousand subscribers in Q1 2022 reflects this, causing the share price to fall by over 30%, continuing its decline.

Netflix’s management plans to stop publishing subscriber statistics from 2025 onwards to mitigate these challenges and focus investors’ attention on revenue per user, total revenue, and operating margin.

Amid slowing membership growth, the company is exploring new growth drivers, with advertising viewed as a potential source. Netflix’s management has noted that advertising is becoming increasingly significant to the company’s operations. However, building this business from scratch will take time, meaning it is unlikely to become the primary driver of revenue growth in 2024 and 2025.

Netflix forecasts 14% year-on-year revenue growth in Q3 2024, although a lower increase in paying users is expected compared to the same period in 2023. At the same time, no changes are anticipated for the global average revenue per user.

Based on the 2024 results, revenue is projected to rise by 14−15%, compared with the earlier forecast of 13−15%, while the operating margin is expected to reach 26%, up from the earlier estimate of 25%. The company’s goal remains to increase operating profit.

Netflix, Inc. Q3 2024 earnings results

On 17 October, Netflix released its Q3 2024 report. Below is a comparison of its data with the corresponding period in 2023:

• Revenue: 9.82 billion USD (+15%)
• Net income: 2.36 billion USD (+41%)
• Earnings per share: 5.40 USD (+20%)
• Operating profit: 2.94 billion USD (+25%)
• Operating margin: 29.6%​ (+720 basis points)
• Total subscribers: 282.7 million (+14%)

Co-CEO Theodore Sarandos noted that content production is recovering after last year’s strikes in Hollywood, with series rebounding more rapidly than films. The company’s advertising business showed significant growth, with the number of subscribers to ad-supported plans increasing by 35% from the previous quarter. More than half of the new users in regions with ad services chose this package option. However, the company emphasised that effective ad monetisation will take time, and this segment will not become a primary revenue stream in the near term.

In Q4 2024, Netflix projected earnings per share of 4.20 USD, with revenue expected to reach 10.12 billion USD, representing annual revenue growth of 15%. The total number of subscribers was forecast to increase by 8.2 million, reaching approximately 290.9 million.

The company anticipated that its advertising revenue would double in 2025, driven by a 150% increase in advertising commitments secured during 2024. Despite the upbeat forecast, Netflix noted that advertising was not expected to become a primary revenue driver in the near term. This guidance highlighted the company’s ongoing efforts to strengthen its position in the streaming market and diversify its revenue streams.

Netflix, Inc. Q4 2024 earnings results

Netflix released a strong Q4 2024 report on 21 January. Below is a comparison of its results with the corresponding period in 2023:

• Revenue: 10.24 billion USD (+16%)
• Net income: 1.87 billion USD (+99%)
• Earnings per share: 4.27 USD (+102%)
• Operating profit: 2.27 billion USD (+51%)
• Operating margin: 22.2% (+530 basis points)
• Total subscribers: 301.6 million (+15%)

In its commentary on the Q4 2024 results, Netflix’s management expressed satisfaction with the company’s strong financial performance and strategic progress. They highlighted a 16% year-on-year increase in revenue and a 102% rise in EPS, both of which exceeded market expectations. The quarter also saw a significant increase in subscriber numbers, reaching 301.6 million, driven by compelling content, including major releases such as the Jake Paul vs Michael Tyson fight and NFL games.

Management emphasised the importance of continued investment in original content, which has helped boost user engagement and reduce subscriber churn. Additionally, plans were announced to expand Netflix’s proprietary advertising platform to a further twelve countries, aiming to improve margins and monetisation by reducing reliance on intermediaries. Netflix’s management reiterated its confidence in the company’s strategic direction, highlighting that investment in content and the development of advertising technologies are key drivers of growth and long-term success.

For 2025, Netflix provided guidance indicating continued optimism. The company raised its full-year revenue forecast to approximately 44.00 billion USD – an increase of 0.50 billion USD compared to previous estimates. The operating margin was projected at 29%, which is one percentage point higher than earlier expectations. Management also referred to plans for further investment and expansion across gaming, advertising, and live streaming, aiming to enhance the platform’s appeal to subscribers.

Netflix, Inc. Q1 2025 earnings results

On 17 April, Netflix released its Q1 2025 report, again demonstrating strong financial performance. Below is a comparison of its data with the corresponding period in 2024:

• Revenue: 10.54 billion USD (+13%)
• Net income: 2.89 billion USD (+24%)
• Earnings per share: 6.61 USD (+25%)
• Operating income: 3.34 billion USD (+27%)
• Operating margin: 31.7% (+360 basis points)

Netflix demonstrated impressive resilience amid economic challenges, including concerns about US trade policy. The company reported a 13% year-on-year revenue increase to 10.5 billion USD and a rise in net income to 2.9 billion USD. CEO Greg Peters noted that Netflix has historically been a stable company, even during economic downturns, without significant changes in customer behaviour.

A notable development was Netflix’s strategic shift towards advertising. The ad-supported plan accounted for 55% of new subscriptions in regions where it is available, highlighting the successful development of new revenue streams. The company plans to double its advertising revenues in 2025 through its proprietary ad platform.

For Q2 2025, Netflix projected revenue of 11.04 billion USD, reflecting steady growth driven by increases in both subscriptions and advertising revenue. The company maintained its annual revenue forecast within the range of 43.5 to 44.5 billion USD and raised its operating margin target to 29% (up from 28%). These projections emphasise Netflix’s confidence in its strategy and its ability to navigate economic challenges.

In its Q1 2025 earnings commentary, Netflix set an ambitious target to reach a market capitalisation of 1 trillion USD by 2030. Ted Sarandos confirmed that this is not an official forecast or financial guidance. To achieve this target, Netflix planned to double its 2024 revenue (which amounted to 39 billion USD) by 2030, with a primary focus on expanding its advertising segment. The company expected to generate 9 billion USD from global advertising sales by leveraging the growing popularity of its ad-supported subscription tier. Additionally, Netflix invested in its advertising technology platform, launched on 1 April 2025, which is designed to enhance its advertising capabilities and drive further revenue growth.

Netflix’s long-term growth strategy, including the goal of reaching a 1 trillion USD market capitalisation by 2030, demonstrates its commitment to innovation and considered development.

Netflix, Inc. Q2 2025 earnings results

On 17 July, Netflix released its Q2 2025 results, once again exceeding expectations. Below are the key figures compared to the same period in 2024:

• Revenue: 11.08 billion USD (+16%)
• Net income: 3.13 billion USD (+46%)
• Earnings per share: 7.19 USD (+47%)
• Operating income: 3.77 billion USD (+45%)
• Operating margin: 34.1% (+690 basis points)

Netflix delivered strong Q2 2025 results, with revenue rising 16% year-on-year to approximately 11.08 billion USD and a sharp increase in net income and earnings per share of 46−47% to 3.13 billion USD (7.19 USD per share), beating analyst expectations.

Advertising has become a new growth driver for Netflix. The company is actively developing its proprietary advertising platform, Ads Suite, which includes targeting, programmatic buying, and interactive formats. Netflix has confirmed that it expects to double advertising revenue in 2025, a segment that could significantly diversify its income streams. Content has remained a core strength. Although the company no longer discloses subscriber numbers, it reported high user engagement: the third season of Squid Game reached 122 million views and releases such as Stranger Things and other flagship titles were scheduled for the second half of the year. This helped support growth in viewing time and subscriber retention. Additionally, the implementation of AI has contributed to margin expansion. Management expected the full-year operating margin to be around 30%. The use of AI in content production and personalised recommendations has allowed the company to reduce costs and increase engagement.

For Q3 2025, management expected revenue of 11.53 billion USD, above the consensus estimate of 11.31 billion USD. Content expenses were forecast to rise in Q3 and especially in Q4, including costs associated with sports streaming. However, the company still projected margin growth both quarter-on-quarter and year-on-year.

Investor reaction to the Q2 2025 report was mixed. At first glance, the results were strong, with revenue and earnings per share exceeding expectations, and management raising the full-year forecast. However, despite this, shares fell by 5% the day after the report’s release, as a substantial part of the earnings growth was attributed not to operational improvements but to a favourable currency effect – a weakening US dollar.

Moreover, ahead of the report, shares had already risen significantly and were trading at a high premium – approximately 44 to 47 times forward earnings – nearly double the average level over the past three years. This meant the market had already priced in very high expectations. Consequently, following the report, some investors chose to take profits while shares were trading near their historical peak.

Netflix, Inc. Q3 2025 earnings results

On 21 October, Netflix released its Q3 2025 results. The key figures compared with the same period in 2024 are as follows:

• Revenue: 11.51 billion USD (+17%)
• Net profit: 2.55 billion USD (+8%)
• Earnings per share: 5.87 USD (+9%)
• Operating profit: 3.25 billion USD (+12%)
• Operating margin: 28.2% (–140 bps)
• Free cash flow: 2.66 billion USD (+21%)

Netflix delivered strong revenue growth in Q3 2025 – up 16% year-on-year – in line with company forecasts. However, profit came in slightly below expectations due to one-off expenses of around 619 million USD related to a tax dispute in Brazil. The company recognised these costs within cost of revenue, which reduced the operating margin by more than five percentage points. Without this factor, the margin would have exceeded the projected 31.5% level. Earnings per share were 5.87 USD – higher than a year earlier (5.40 USD) but roughly 1 USD below Netflix’s internal forecast due to the tax-related charge.

Despite this, the company’s core business indicators remained very strong. Netflix reported record advertising sales and a substantial increase in long-term contracts with advertisers in the US. Platform viewing share rose to its highest level since late 2022 in both the US and the UK. The company highlighted strong audience interest in content – among films, KPop Demon Hunters led the way – while live streaming continued to expand, including popular broadcasts of sporting events such as the Canelo vs Crawford fight. Management noted that the advertising business continues to grow rapidly and, according to external estimates, could more than double in 2025.

For Q4 2025, Netflix expects revenue of about 11.96 billion USD, up 17% year-on-year. The operating margin is projected at around 23.9%, two percentage points higher than in the same quarter of the previous year. For the full year 2025, the company now anticipates revenue of approximately 45.1 billion USD, a 16% increase from 2024. The forecast for operating margin has been slightly reduced to around 29%, down from the earlier projection of 30%, due to the one-off tax-related costs in Brazil.

Fundamental analysis of Netflix, Inc.

Below is the fundamental analysis of Netflix, Inc. (NASDAQ: NFLX) based on the results for Q3 2025:

• Liquidity and cash flows: at the end of the third quarter, the company held 9.29 billion USD in cash and a further 37 million USD in short-term investments. Free cash flow for Q3 totalled 2.66 billion USD and 7.59 billion USD for the first nine months. Management raised its full-year 2025 FCF forecast to 9 billion USD, slightly above earlier expectations. Current assets stand at 12.96 billion USD, with liabilities of 9.73 billion USD, giving Netflix a comfortable short-term liquidity position (current ratio of around 1.33×).
• Debt and interest coverage: total debt amounts to 14.5 billion USD, while net debt, adjusted for cash holdings, is about 5.2 billion USD – modest for a company of this scale. During the quarter, Netflix spent 175 million USD on interest payments against an operating profit of 3.25 billion USD. This means operating profit covers interest expenses nearly 19 times, highlighting strong financial resilience. In addition, Netflix has an unused 3 billion USD credit facility valid until April 2029 and a commercial paper program of the same size, with no outstanding balance as of mid-2025. Loan agreements require a minimum interest coverage ratio of 3×, which the company comfortably exceeds. Most of the debt is issued as fixed-rate bonds, reducing exposure to interest rate fluctuations.
• Content obligations and cost structure: total content commitments amount to around 20.94 billion USD, slightly lower than at the end of 2024. Part of these obligations is already recorded on the balance sheet as short- and long-term liabilities. The largest cost item for Netflix is content amortisation – the gradual write-off of film and series costs – while operating cash flows remain consistently positive.
• Profitability and capital returns: under its capital return program, Netflix repurchased shares worth 1.9 billion USD, with total authorisation exceeding 10 billion USD. The company holds investment-grade credit ratings (Moody’s: A3; S&P: A), confirming its strong creditworthiness and enabling it to borrow at favourable rates.

Conclusion – fundamental view on NFLX

Netflix maintains very strong financial stability and a balanced capital structure. The company has relatively low net debt compared with its robust profit base and cash generation, while its interest coverage ratio remains comfortably high, indicating minimal credit risk. Liquidity is also impressive: cash and equivalents exceed short-term liabilities, and free cash flow continues to grow steadily, enabling the company to fund expansion without incurring new debt.

Given its current financial position, Netflix has ample capacity to invest in new growth areas, such as advertising and live streaming, while continuing to return capital to shareholders through buybacks and dividends – all without compromising financial strength. This makes Netflix one of the most reliable companies in the media and entertainment sector in terms of long-term financial resilience.

Expert forecasts for Netflix, Inc. stock for 2025

• Barchart: 30 out of 47 analysts rated Netflix shares as Strong Buy, 3 as Buy, 13 as Hold, and 1 as Strong Sell. The upper forecast limit is 1600 USD, while the lower stands at 800 USD.
• MarketBeat: 29 of 39 specialists gave the stock a Buy rating, 8 recommended Hold, and 2 advised Sell. The highest forecast is 1600 USD, with the lowest at 720 USD.
• TipRanks: 18 of 24 professionals recommend Buy, and 6 suggest Hold. The top forecast level is 1510 USD, and the bottom is 1100 USD.
• Stock Analysis: 11 of 31 experts rated the shares as Strong Buy, 14 as Buy, and 6 as Hold. The upper forecast limit is 1600 USD, and the lower is 875 USD.

Netflix, Inc. stock price forecast for 2025

In June 2025, NFLX shares reached resistance at 1340 USD before turning lower. The release of the Q2 2025 report temporarily slowed the decline, but the publication of the Q3 results acted as a catalyst for a break below support at 1150 USD, accelerating the sell-off. The downward move was driven mainly by the company’s reduced operating margin outlook. Based on the current price dynamics, several scenarios for NFLX share performance in 2025 can be outlined.

The base-case forecast for NFLX suggests a test of support around 1000 USD, implying a potential additional decline of roughly 10%. A rebound from this level is expected, with a possible recovery towards the historical high of around 1340 USD. Netflix remains financially resilient, and its 10 billion USD share buyback program could support the stock amid market weakness. Looking ahead, it is possible that the company may introduce dividend payments to attract more investors, which would serve as an additional catalyst for share growth.

The alternative scenario for the NFLX stock forecast assumes a break below the 1000 USD support. In this scenario, the share price could fall to around 830 USD. Such a development would likely occur amid a broader decline across US equity indices.

Risks of investing in Netflix, Inc. stock

Investing in Netflix stock carries risks and potential challenges for the company. These include:

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• Competition: major competitors with streaming services such as Disney+, Amazon Prime Video, HBO Max, and Apple TV+ are expanding their content libraries and subscriber bases. The company also faces competition from local market players who may offer more relevant content to regional viewers.
• Content costs: producing high-quality original content requires a significant investment. Inflated costs may impact the company’s profitability.
• Market saturation – growth in subscriber numbers may slow down in countries with high streaming service penetration.
• User reaction to ads: although users are currently tolerant of ads and subscribing to the ad-supported plan, a shift in user sentiment could significantly harm the company’s financial position.
• Legal risks: the company has already recognised one-off expenses of around 619 million USD related to a tax dispute in Brazil, although the matter has not yet been fully resolved. Management has noted that no further material financial impact is currently expected; however, there remains a possibility of additional legal or tax costs if the Brazilian authorities reopen the case. This factor continues to represent a source of uncertainty and could temporarily affect profitability in the future.