Netflix reported third-quarter 2025 earnings of $5.87 per share, missing estimates due to a $619 million expense related to a Brazilian tax dispute. Despite the miss, shares rose 48.6% over the year. Revenues increased 17.2% YoY, driven by growth in memberships, pricing, and advertising. Operating margin was below forecast due to the tax issue.

Record engagement fueled growth, with Netflix achieving its highest viewing share ever in the US and UK. All regions saw revenue growth, with UCAN up 17%, EMEA up 18%, Latin America up 10%, and Asia-Pacific up 21%. Operating margin fell short at 28% due to the tax dispute. Marketing expenses rose 22.3%.

KPop Demon Hunters became a cultural phenomenon, breaking records as Netflix’s most-watched film with over 325 million views. The film’s success extended beyond streaming, leading to a No. 1 Billboard hit. Partnerships with toy companies for merchandise were announced.

Netflix delivered a strong content slate in Q3, including successful releases like Wednesday Season 2 and Happy Gilmore 2. International content like Hostage and My Oxford Year also performed well. Live programming hit a milestone with the Canelo vs. Crawford fight.

Netflix’s advertising business boomed in Q3, doubling ad revenues. The company partnered with Spotify to bring podcasts to its platform. It declared a focus on AI integration for ad testing and content creation. The company is expanding its offerings and capabilities.

Netflix declared a focus on leveraging generative AI across its platform for recommendations, advertising, and content creation. The company highlighted AI’s role in recent productions. Balance sheet showed improved cash flow and operational efficiency.

For Q4 2025, Netflix expects revenues of $11.96 billion and EPS of $5.45. Full-year revenue forecast is $45.1 billion, with an adjusted operating margin of 29%. Free cash flow guidance is around $9 billion. Q4 content slate includes major releases like Stranger Things Season 5 and Frankenstein.

AI’s second wave is here, with little-known firms possibly offering bigger profits than well-known stocks. Amazon, Apple, Netflix, and Disney are mentioned. AI firms tackling big problems may be lucrative. The article was originally published on Zacks Investment Research.

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