Netflix Q3 Earnings Miss, But Record Ad Sales And Viewership Signal Strong Q4 Momentum

Streaming giant Netflix Inc (NASDAQ:NFLX) reported third-quarter financial results Tuesday after market close.Here are the key highlights and a look at what's next.Q3 Earnings Highlights: Netflix reported third-quarter revenue of $11.51 billion, up 17.2% year-over-year. The revenue total missed a Street consensus estimate of $11.514 billion, according to data from Benzinga Pro.The company reported earnings per share of $5.87, missing a Street consensus estimate of $6.97.Revenue and year-over-year growth by region were as follows: UCAN: $4.93 billion, +15% year-over-year EMEA: $3.54 billion, +18% year-over-year LATAM: $1.31 billion, +9% year-over-year APAC: $1.31 billion, +24% year-over-year Netflix said higher revenue came from membership growth, higher pricing, and increased advertising revenue.Operating margin was 28% in the quarter, well below guidance of 31.5%. The company said the lower rate was due to an "ongoing dispute with Brazilian tax authorities." Without the dispute, the operating margin would have been above the company’s forecast.Netflix had its highest-ever quarterly view share in the United States and the United Kingdom since the fourth quarter of 2022. Key titles highlighted in the quarter for Netflix were "Wednesday," "Happy Gilmore 2," "Your Majesty from South Korea," and "KPOP Demon Hunters.""Happy Gilmore 2" had 126 million views and set a Nielsen streaming record with 2.9 billion minutes viewed in its opening weekend. "KPop Demon Hunters" became the company's most-watched film ever.The live Canelo vs. Crawford boxing match was the most-viewed men's championship fight this century. The fight had over 41 million views.The company reported its biggest quarter ever for advertising sales and stated that it had doubled its commitments at the U.S. upfront.Read Also: Netflix Q3 Earnings Preview: Will ‘KPop Demon Hunters’ Help Streamer Beat Estimates?What's Next: Netflix is guiding for fourth-quarter revenue to be $11.96 billion, up 16.7% year-over-year. The Street estimate is $11.902 billion according to data from Benzinga Pro.The company said it expects fourth-quarter growth to come from higher membership figures, higher pricing and increased advertising revenue.Netflix is guiding for fourth quarter earnings per share of $5.45, versus a Street estimate of $5.42.For the full fiscal year, the company sees revenue hitting $45.1 billion, up 16% year-over-year. The total would be in line with an original forecast of 15% to 16% revenue growth."We're only in our second decade of original programming," the company said.Earlier Tuesday, the company announced new licensing deals with Mattel and Hasbro for "KPop Demon Hunters.""We are actively expanding the KPop Demon Hunters universe, bringing fans new experiences and products worldwide."The company said it sees more opportunities for the hit movie through live experiences, publishing, beauty, lifestyle and food and beverage.For fourth quarter content, the company highlighted "Stranger Things," "The Diplomat," "Nobody Wants This," "Frankenstein," "A House of Dynamite," "Squid Game: The Challenge Season 2" and "Wake Up Dead Man: A Knives out Mystery." The company also highlighted its upcoming Jake Paul vs. Tank Davis boxing match and two NFL Christmas Day games."We can't wait for our members to experience our Q4 slate."Netflix said it is expanding advertising opportunities for partners, including the use of AI to test new ad formats and for faster ad implementation."We have a solid foundation and are increasingly confident in the outlook for our ads business."The company is on track to more than double its advertising revenue in 2025.NFLX Price Action: Netflix stock is down 5% to $1,181.00 in after-hours trading on Tuesday versus a 52-week trading range of $744.34 to $1,341.15. Disney Raises Streaming Prices: Is Disney+ Now More Expensive Than Netflix? Photo: Emre Akkoyun / Shutterstock.com