Netflix Kept Growing in Q3 2025, But Investors Wanted More
Netflix’s ad business provided one of its brightest revenue spots, hitting record high.
• Netflix delivered solid revenue and profit growth in Q3, driven by membership gains, higher ad sales, and strategic price hikes.
• A one-time tax expense in Brazil weighed on margins and earnings, leading to a short-term dip in investor confidence.
• Despite the earnings miss, Netflix’s ad business hit a record high and is on track to more than double revenue this year.
Netflix’s third-quarter report was a mix of solid gains and investor disappointment. The streaming powerhouse once again expanded its revenue and profits, fueled by subscriber growth, stronger ad sales, and price hikes. Yet, an unexpected tax expense in Brazil dimmed what could have been another headline-beating quarter and investors weren't thrilled.
Revenue climbed 17% year-over-year to $11.5 billion, roughly matching expectations. Net income rose 8% to $2.55 billion, while operating income increased 12% to $3.25 billion. Even better, free cash flow jumped 21%, showing Netflix’s business is still throwing off serious cash.
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However, a drop in operating margin to 28.2% reflected ongoing cost pressures, something Netflix attributed to the one-time Brazilian tax charge. The company clarified that without this expense, its operating margin would have exceeded its 31% forecast.
The market response was sour with shares falling as much as 6% in after-hours trading, erasing some of the 40% gain the stock had notched earlier this year. Investors, long accustomed to Netflix outperforming expectations, as it had topped earnings forecasts in 14 of the past 16 quarters, were caught off guard.
