“Netflix posted revenue and earnings growth for its third quarter, but a dispute with tax authorities in Brazil ate into profit margins, sending the streaming giant’s stock down in Tuesday after-hours and before Wednesday’s market open. The unexpected disruption caused investor jitters. That, along with comments from co-CEOs Ted Sarandos and Greg Peters on various issues”, — write: www.hollywoodreporter.com
That, along with comments from co-CEOs Ted Sarandos and Greg Peters on various issues – from advertising trends and its M&A appetite amid Warner Bros. Discovery’s news that it was open to deals to AI gave Wall Street analysts much to chew on in their earnings analysis.
That excludes subscriber trends as Netflix is no longer releasing figures on a quarterly basis, choosing instead to put its focus on financial momentum.
As of 9:40 am ET, Netflix shares were down 7.8 percent at $1,145.12.
TD Cowen analyst John Blackledge commented on the fact that Netflix said that, were it not for the Brazil tax issue, which resulted in a payment of approximately $619 million to settle the dispute dating back to 2022, it would have beaten its forecast, adding that it sees no material impact on future results. With that in mind, the expert highlighted that third-quarter revenue was “in line with estimates, operating income ahead excluding retroactive Brazil charge,” while fourth-quarter guidance was “largely in line.”
He also noted as a positive that Netflix now forecasts to more than double its advertising revenue in 2025, “versus prior expectation to ‘roughly double’ ad revenue.”
Blackledge also found much to like in terms of Netflix’s content slate. “Third-quarter results were supported by strong viewership of Wednesday (season 2), Happy Gilmore 2, Crawford vs. Alvarez, and KPop Demon Hunters,” he highlighted. “Management expects that fourth-quarter engagement will benefit from a strong content slate, which includes returning hits Emily in Paris (season 5) and the final season of Stranger Things.”
All in all, Blackledge maintained his “buy” rating and $1,425 stock price target on Netflix, concluding: “Shares down 6 percent [are] an overreaction, in our view.”
Guggenheim analyst Michael Morris also saw no need for panic, maintaining his “buy” rating with a $1,450 stock price target in a report entitled “Steady Progress, With Irons in the Fire for Incremental Growth.”
“We expect engagement momentum to continue into the fourth quarter, with slate highlights included Stranger Things, The Diplomat (season 3), Nobody Wants This (season 2),” he wrote. “We see additional growth opportunities into 2026, including continued ramp in advertising (particularly programmatic), video games, franchise expansion and consumer products, podcasts (Spotify deal), and live content partnerships (TF1 partnership).”
MoffettNathanson analyst Robert Fishman had a similarly chill reaction to the latest quarterly figures, choosing the title “Monetization in Full Swing” for his report, in which he stuck to his “buy” rating and $1,400 stock price target.”
His takeaway: “Netflix sits in an enviable position across the streaming landscape. As the industry leader with revenue growth expected to reach 16 percent this year, the company still has numerous levers to pull to drive higher monetization of its global subscriber base and best-in-class (paid) engagement.”
Meanwhile, Mark Mahaneyanalyst at Evercore ISIshared the following conclusion in the headline of his Netflix earnings analysis: “No Pop, But All Is Okay.” He reiterated his “outperform” rating and $1,375 price target in the wake of what he acknowledged were “mixed” results.
“We believe Netflix shares traded off 6 percent in the aftermarket due to three factors,” Mahaney offered. “The sloppy operating income result due to the Brazil expense issue” was only one of those.
Another was “the rare – even though very modest — revenue miss,” a 0.1 percent shortfall compared with guidance and Wall Street expectations, “marking the first miss in two years.” Over that period, Netflix has on average exceeded estimates by 0.6 percent, with the largest outperformance amounting to 1.4 percent. Such a “massive subscription model does not lend itself to major variance either way in any one quarter,” Mahaney emphasized. “Still, in what was a major content quarter (KPop, Wednesday, Happy Gilmore 2etc…), we and the market expected some upside, and we didn’t get it.”
A third and final factor hitting Netflix shares was a lack of 2026 guidance. While there was no promise for that, management did provide an outlook for 2025 during its third-quarter conference call last year. But Mahaney expects a 2026 outlook in the fourth-quarter earnings update to be positive. “We actually believe Street ’26 numbers are more likely to be raised than lowered next quarter,” he argued.
That was one key factor leading the Evercore ISI analyst to recommend that investors “buy this dip.”
His other reasons are that “fundamental trends as fully intact, we believe recent price increases by Disney and HBO provide plenty of air cover for Netflix to follow suit, and we believe Netflix’s upcoming very strong content slate (Stranger Things, Bridgerton, KPop sequels, etc…) will justify price actions.” Even AI, which some on the Street have described as a possible challenge for Netflix, will be a positive, suggested Mahoney, writing: “We view Netflix as an AI winner.”
Bernstein analyst Laurent Yoon also remains bullish on Netflix, but expects investors to tread water until its full-year results and 2026 outlook. In his report entitled “Kicking the can down the road – all eyes on Q4,” he stuck to his “outperform” rating with a $1,390 stock price target.
Beyond the “one-time, unforeseen adjustment” in Brazil, “overall, it was a solid print demonstrating Netflix’s growth trajectory and operating leverage,” he offered. “However, their margin guidance came in short of expectations … mostly driven by the incremental costs incurred in Brazil.”
What lies ahead? “With a strong fourth-quarter content slate, we anticipate another quarter of solid top-line growth,” concluded Yoon. “However, muted guidance driven by the Brazil-related charge has tempered near-term margin optimism, likely keeping the stock range-bound again in the near-term. While management refrained from raising guidance, the setup positions Netflix well for the full year.”
William Blair analyst Ralph Schackart similarly pointed out that Netflix’s quarterly update was a tale of two stories. “Engagement Trends Remain Strong; Tax Dispute Overshadows Business Momentum,” he highlighted in the headline of his report.
“The outlook for Netflix remains positive, in our view, with a strong slate, a broadening advertising platform, solid retention, price changes in line with expectations, and stable engagement,” he concluded, maintaining his “outperform” rating without a stock price target. “Overall, Netflix remains well positioned to remain a secular streaming winner.”
BMO Equity Research analyst Brian Pitz reiterated his “outperform” rating and $1,425 price target on Netflix shares in a note entitled “No Ghosts or Goblins, Just the Brazilian Tax Man.”
He looked beyond the Brazilian tax issue to highlight ongoing growth opportunities. “Advertising [is] growing well off a small base,” the analyst wrote. “Gaming remains an attractive long-term opportunity.”
The success of KPop Demon Hunters also led him to monitor the consumer products opportunity for the streamer. Management expects products under Mattel and Hasbro deals to be available in the spring of 2026. “We anticipate strong demand given the 325 million views the movie has achieved,” Pitz said. “While the merchandise opportunity is still early, Netflix believes there is plenty of room for sustained strategy building and strengthening of the KPop franchise over time. We believe this will serve as a practical case study to assess Netflix’s ability to build its own IP and drive meaningful monetization beyond film in merchandising areas like toys and collectibles.”
He and other analysts have little to no expectations that Netflix could bid for Warner Bros. Discovery. “Regarding the WBD ‘for sale’ announcement, management continues to review and weigh M&A opportunities. However, Netflix continues to prioritize organic growth and is relatively uninterested in legacy media,” Pitz concluded.
And Mahaney wrote: “Management also reiterated that they have no interest in owning legacy media networks. That being said, at a $45 billion market cap versus Netflix’s $530 billion, it’s not out of the question.” BUT….we believe [a bid by] Netflix for WBD is unlikely.”
Netflix’s results also once again drew reactions beyond Wall Street. “All things considered, this was a robust quarter, despite a blip due to an unforeseen tax dispute with Brazil,” commented Paolo Pescatoreanalyst at PP Foresight. “However, there might be a concern moving forward about potentially any other unforeseen expenses.”
On the upside, “quarterly revenue growth is now becoming consistent, primarily driven by membership gains, pricing adjustments and increased ad revenue,” he noted. “With no subscriber numbers, some advocates are grasping at straws to find any sign of weakness, as the company is faring much stronger than its rivals.”
Netflix on Tuesday also unveiled deals with Hasbro and Mattel for a range of KPop Demon Hunters merchandise. “This is significant because the streamer is quickly seeking to monetize this franchise as Netflix holds IP rights, including consumer products,” Pescatore highlighted. “While the show turned out to be a surprise sensation (the most popular film ever, with 325 million views), it makes perfect sense to build upon this popularity and ride the wave.”
His conclusion: “More and more, Netflix is flipping the model around and edges closer to Walt Disney as it monetizes successful shows in a variety of ways.”
Frank Albarella, KPMG‘s US sector leader, media & telecommunications, also had a big-picture take on Netflix’s latest set of results. “Streaming has gone from a race to the top to a profitability chess match. AI-driven personalization and ad-supported tiers aren’t experimental anymore; they’re the price of admission for sustainable growth,” he said. “Resilient scaling requires multiple revenue streams: premium, global content that drives engagement and adjacent services like gaming and podcasting that deepen user stickiness, with advertising infrastructure that monetizes it all.”
Ad guru and Madison and Wall principal Brian Wieser in a report highlighted acceleration in Netflix’s ad business. “Netflix said that they had their best ad sales quarter ever and doubled their commitments in the US upfront,” he noted. “Based on our estimates, Netflix gener estimated around $650 million in US advertising revenue in 2024, implying at least $1.3 billion in US ad revenue in 2025. That would represent roughly 2 percent of the total US TV ad market and 7 percent of Netflix’s total US revenues.”