Netflix posts 17% Y-o-Y revenue growth in Q3 despite missing projections

Netflix has once again demonstrated its resilience in a recently turbulent streaming market, reporting robust third-quarter results that highlight its continued dominance in the global entertainment market. Despite missing some Wall Street projections, the company delivered a 17% year-over-year revenue growth, driven by subscriber expansion, a thriving advertising segment, and a compelling lineup of original and live content.  

Its Q3 2025 financial report revealed a revenue of $9.9 billion, closely aligning with analyst projections. However, Netflix’s operating margin fell slightly below forecasts due to an unexpected tax-related expense in Brazil, an issue that temporarily weighed on profitability. 

However, operating income climbed 12% year-over-year to $3.2 billion, showcasing Netflix’s ability to maintain solid performance amid regional headwinds.  

The company also reported a diluted earnings per share (EPS) of $5.87, reflecting steady bottom-line growth, although the figure narrowly missed consensus estimates. The results were accompanied by positive engagement trends, particularly in the U.S. and U.K. markets, where Netflix saw record viewing hours and higher retention rates among paid subscribers.  

Ad sales and content strategy drive Netflix’s Q3 momentum

A standout performance in the quarter was Netflix’s advertising arm, which delivered its strongest performance since the launch of the ad-supported tier in late 2022. The company said its ad sales surged to a new high, with advertisers showing increased interest in Netflix’s expanding global audience and premium content inventory.  

The company’s executives emphasised that ad-supported memberships have grown rapidly, particularly in key markets like the United States, Canada, and Western Europe. 

This growth was fuelled by both the success of Netflix’s popular shows and the platform’s use of artificial intelligence to refine ad targeting and viewer personalisation. The result has been better ad placement, higher engagement, and improved returns for marketers, a crucial advantage in a competitive streaming environment.

Similarly, content remains Netflix’s strongest weapon in retaining and attracting subscribers. The third quarter saw the debut of major titles such as K-Pop Demon Hunters, which became a breakout success among younger audiences, and the Canelo vs. Crawford live boxing event, which drew millions of global viewers. 

These offerings reflect Netflix’s growing ambition to diversify its programming slate, blending blockbuster films, international series, and live entertainment.  

The company has also expanded its gaming portfolio, an area CEO Ted Sarandos described as “a long-term growth pillar”. While still a small contributor to overall revenue, Netflix’s gaming arm has shown consistent progress, with increasing downloads and engagement on mobile devices.  

Strong engagement, softer margins  

Despite the upbeat revenue and engagement figures, Netflix faced margin pressure during the quarter. The tax expense in Brazil reduced its operating margin below initial projections, highlighting the impact of international regulatory and fiscal complexities. Nevertheless, the company remains confident in its long-term profitability outlook.  

Netflix’s management reaffirmed its target for an operating margin of 23.9% in the fourth quarter, citing cost discipline, pricing adjustments, and the ongoing expansion of its ad-supported tier as key margin drivers. 

The platform’s recent price increases in select regions have been carefully implemented to minimise churn while improving average revenue per user (ARPU).  

In its letter to shareholders, Netflix emphasised its commitment to “sustainable growth through better monetisation, smarter content investments, and continued innovation in user experience.” 

The company also pointed to advances in AI and machine learning, which are being used not only to enhance content recommendations but also to optimise ad delivery and production efficiency.  

Netflix achieved these strong Q3 results amid an increasingly competitive streaming ecosystem. Rivals like Disney+, Amazon Prime Video, and Warner Bros. Discovery’s Max are investing heavily in exclusive content and ad-supported tiers to capture audience share. Yet the company continues to lead the market, thanks to its early global expansion, vast content library, and brand recognition.  

Analysts say Netflix’s ability to maintain double-digit revenue growth, even as the broader streaming market matures, reflects its strong operational discipline and adaptability. 

The company’s decision to crack down on password sharing, implemented earlier this year, has also proven effective in converting freeloading viewers into paying customers, further boosting membership numbers.  

The company is expected to maintain the momentum through the fourth quarter and into 2026. Management anticipates revenue growth driven by membership gains, selective pricing increases, and expanding ad sales. 

With a steady content pipeline, including new seasons of Bridgerton, The Witcher, and several live sporting events, Netflix is positioning itself to sustain engagement and reinforce its market leadership.  

Meanwhile, following the Q3 announcement, Netflix shares initially dipped in after-hours trading due to the earnings miss but quickly stabilised as investors digested the overall strength of the report. 

Market observers noted that while some metrics fell short of consensus, the broader narrative remains favourable: Netflix is growing at a healthy pace, diversifying its revenue streams, and managing costs effectively.