Should Investors Buy the Netflix Dip?

Published: Monday, October 27, 2025 at 8:15 am

Netflix Stock Dips Following Earnings Report, But Growth Remains Strong

Shares of Netflix experienced a downturn following the release of its latest earnings report, despite solid revenue growth. The streaming giant's stock price fell after earnings per share (EPS) missed analyst estimates, primarily due to an unexpected tax charge in Brazil. While revenue met expectations, the Brazilian tax expense significantly impacted profitability, leading to the EPS shortfall.

Despite the recent dip, Netflix's stock has performed well this year, up approximately 23% year-to-date. The company reported strong overall revenue growth, with a 17% increase to $11.51 billion, aligning with analyst consensus. However, EPS rose only 9% to $5.87, falling short of the anticipated $6.97 due to the aforementioned tax issue.

Netflix highlighted its continued growth, citing the success of its original content, including its most popular film to date. The company is also expanding into licensing opportunities for merchandise related to its popular titles. Looking ahead, Netflix has a robust content slate planned for the fourth quarter, including the final season of a popular series and live events, such as NFL games and a boxing match.

The company's advertising business is also showing promise, with Netflix on track to double its ad revenue this year. The ad-tiered plans are available in 12 markets, and the company is utilizing artificial intelligence to improve ad formats and placement. Revenue growth was strong across various regions, with Asia-Pacific leading the way, followed by EMEA, Latin America, and the U.S. and Canada.

Netflix continues to generate substantial free cash flow, producing $2.7 billion during the quarter and projecting between $8 billion and $8.5 billion for the full year. The company forecasts a 17% revenue growth for the fourth quarter, with an operating margin of 23.9%. For the full year, Netflix expects revenue of $45.1 billion, at the upper end of its previous guidance. However, it did lower its operating margin expectations from 30% to 29% due to the tax issue.

BNN's Perspective: While the earnings miss is concerning, the underlying growth story at Netflix remains compelling. The company's dominance in the streaming market, coupled with its expanding advertising business and strong content pipeline, suggests long-term potential. However, the stock's premium valuation warrants caution. Investors should consider the dip as a potential entry point, but remain mindful of the risks associated with the current valuation.

Keywords: Netflix, NFLX, earnings, revenue, EPS, stock, streaming, advertising, growth, Brazil, tax, content, ad revenue, free cash flow, investors, buy, dip

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