After beating Q1 and Q2 earnings, the question heading into Netflix’s Q3 earnings was if the streaming company could sustain its momentum. That didn’t appear to be the case after it missed its earnings expectations following the closing bell on Tuesday, October 21.
As reported by CNBC, here’s how Netflix’s numbers shook out relative to analyst estimates polled by analytics firm LSEG:
- Earnings per share: $5.87 vs. $6.97 (LSEG estimate)
- Revenue: $11.51 billion vs. $11.51 billion (LSEG estimate)
In a shareholder letter, the online streaming company cited a tax dispute with Brazilian authorities as the prime reason for the earnings miss. However, they were optimistic that it was an isolated accounting incident that wouldn’t materially affect future numbers.
“Operating margin of 28% was below our guidance of 31.5% due to an expense related to an ongoing dispute with Brazilian tax authorities that was not in our forecast,” Netflix said. “Absent this expense, we would have exceeded our Q3’25 operating margin forecast. We don’t expect this matter to have a material impact on future results.”
One of the concerns heading into Q3 earnings was if Netflix can keep subscribers after their recent price hikes. With inflation still relatively high, consumers are still feeling the pinch heading into holiday season. Consumers may consider cutting costs for non-essentials, which includes subscriptions related to entertainment.
That didn’t appear to materialize, as Q3 earnings also revealed that revenue rose 17% (in line with estimates) while net profit was 8% higher (below estimates). One of the main contributors for the positive numbers was increased subscribership as well as growing ad revenue. This could leave bullish Netflix traders with something to hang their hats on and take advantage of price dips following the release of its earnings.
Trade Netflix 2 Ways
If Netflix can regain the bullish momentum it had in the first two quarters of 2025, traders can use the Direxion Daily NFLX Bull 2X Shares (NFXL ) to double up on exposure. The extra leverage gives traders the opportunity to double their profits without the use of a margin account or purchasing an extra number of shares.
For added flexibility, they can also play the bearish side with the Direxion Daily NFLX Bear 1X Shares (NFXS ). Event-driven traders can use NFXS like the latest negative earnings report or other news-related item that applies downward pressure on Netflix stock prices. Furthermore, traders can use NFXS as a sole position to profit from the stock price falling or as a tactical hedge via a pairs trade with NFXL.
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