Netflix reported third-quarter 2025 earnings after market close on October 21, revealing adjusted earnings per share (EPS) of $5.87—missing analyst consensus of $6.96 and the company's own guidance of $6.87—primarily due to a one-time expense from an ongoing dispute with Brazilian tax authorities.
Revenue hit $11.51 billion, up 17% year-over-year and aligning closely with Wall Street's $11.51 billion forecast, driven by membership growth, pricing hikes, and surging ad sales. The results triggered an immediate stock slide, with shares dropping around 5% to $1,181 in after-hours trading from a close of $1,241, reflecting investor disappointment over the EPS shortfall despite robust top-line performance.
Netflix's Q3 outcomes highlight a mixed bag: strong revenue momentum offset by margin pressure from the unforeseen tax charge, which dragged operating margin to 28%—below the guided 31.5%. Absent the Brazil-related expense, margins would have surpassed expectations, underscoring the quarter's underlying strength in core operations.
U.S. revenue specifically rose 17%, fueled by paid sharing crackdowns and ad-tier adoption. Ad revenue marked its "best quarter ever," with U.S. upfront commitments doubling year-over-year; Netflix is now on pace to more than double full-year 2025 ad sales from $1.4 billion in 2024 to $2.9 billion.
Reasons for the Earnings Miss
The EPS and margin shortfalls stem largely from the Brazilian tax dispute, described by Netflix as a non-material, one-off hit not baked into prior forecasts. This echoes broader challenges in emerging markets but aligns with the company's shift away from quarterly subscriber reporting (suspended since Q1 2025) toward revenue as the primary growth metric.
Last reported subscriber count was 301.6 million paid memberships at end-2024; while not disclosed, implied growth from pricing and ads supported the revenue beat on expectations.