Netflix Gears Up to Report Q3 Earnings: Buy, Sell or Hold NFLX Stock?

Netflix NFLX is slated to report third-quarter 2025 results on Oct. 21. For the third quarter, Netflix projects revenues of $11.526 billion, suggesting year-over-year growth of approximately 17% on both a reported and foreign exchange neutral basis. This revenue growth is expected to be driven by continued expansion in members, pricing adjustments, and increasing advertising revenues.The Zacks Consensus Estimate for third-quarter revenues is pegged at $11.52 billion, indicating growth of 17.3% year over year.The company provided specific earnings guidance, projecting diluted earnings per share of $6.87 for third-quarter 2025, with expected operating income of $3.625 billion and net income of $2.979 billion for the quarter. The consensus mark for earnings is pegged at $6.89 per share, currently above the company’s expectations. The estimate has remained unchanged over the past 30 days.NFLX Estimate MovementImage Source: Zacks Investment ResearchNFLX Earnings Surprise HistoryIn the last reported quarter, the company delivered an earnings surprise of 1.7%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.41%.Netflix, Inc. Price and EPS Surprise Netflix, Inc. price-eps-surprise | Netflix, Inc. QuoteEarnings Whispers for NFLXOur proven model does not predict an earnings beat for Netflix this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.NFLX has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Factors Shaping Upcoming Results of NetflixThe company forecasted an operating margin of 31% for the third quarter, which would represent a 2 percentage point improvement compared to third-quarter 2024. Netflix noted that, similar to past years, the operating margin in the second half of 2025 would be lower than in the first half due to higher content amortization and increased sales and marketing costs associated with their larger second-half programming slate. This structural pressure on profitability, despite revenue growth, raises questions about sustainable margin expansion.The content slate delivered significant engagement drivers during the quarter. Squid Game Season 3, which premiered on June 27, generated a record-breaking 60.1 million views in its first three days and maintained its position as a cultural phenomenon throughout the period. KPop Demon Hunters emerged as an unexpected breakout success, becoming Netflix's most-watched animated original film and subsequently the platform's most popular film of all time with more than 236 million views by late August. Wednesday Season 2 launched in a strategic two-part release, with Part 1 debuting on Aug. 6 and Part 2 concluding on Sept. 3, featuring a high-profile guest appearance by Lady Gaga that generated significant social media buzz and viewership. This staggered release strategy kept the series in the cultural conversation throughout the quarter and extended its impact on subscriber metrics.The company also highlighted its continued expansion of live programming with two marquee boxing matches in the third quarter, including the Taylor vs. Serrano rematch and the Canelo vs. Crawford fight.Regarding the advertising business, Netflix indicated that its U.S. upfront negotiations were nearly complete, with the vast majority of deals closed with major agencies. They are expected to have been consistent with the company's goal to roughly double advertising revenues in 2025. The company completed the rollout of the Netflix Ads Suite, its proprietary first-party ad tech platform, across all advertising markets, with early results likely to be in line with expectations.Given these dynamics, existing shareholders appear well-positioned to maintain holdings given Netflix's expanding monetization capabilities and durable competitive advantages against other streaming giants, including Apple AAPL, Amazon AMZN and Disney DIS. However, prospective investors face a more challenging risk-reward proposition. The combination of premium valuations, near-term margin pressure, and execution risks associated with the advertising buildout suggested waiting for a more attractive entry point represented the prudent course. A pullback following earnings or broader market volatility could provide better opportunities to establish positions in this streaming leader.Top-Line Growth Estimates for Q3The consensus mark for third-quarter 2025 Asia-Pacific revenues is pegged at $1.39 billion, indicating 23.9% growth from the figure reported in the year-ago quarter.The Zacks Consensus Estimate for Latin America revenues is pegged at $1.45 billion, suggesting a rise of 17.3% from the figure reported in the previous quarter.Moreover, the consensus mark for EMEA revenues is pegged at $3.68 billion, suggesting an increase of 17.5% from the figure reported in the year-ago quarter.The Zacks Consensus Estimate for the United States and Canada revenues is pegged at $4.99 billion, indicating a 15.5% rise from the figure reported in the year-ago quarter.NFLX Price Performance & Stock ValuationShares of Netflix have gained 32.7% in the year-to-date period compared with the Zacks Consumer Discretionary sector’s growth of 28%. Amazon, Apple and Disney’s shares have plunged 2.8%, 1.1% and 1.2%, respectively in the same time frame.Netflix Outperforms Sector, PeersImage Source: Zacks Investment ResearchNow, let’s look at the value Netflix offers investors at current levels. Currently, NFLX is trading at 38.18X forward 12-month earnings, above its five-year median of 33.8X. Meanwhile, the Zacks Broadcast Radio and Television industry’s forward earnings multiple sits at 29.92X. The company’s valuation looks somewhat stretched compared with its range and the industry average.Price-to-Earnings (Forward 12 Months)Image Source: Zacks Investment ResearchInvestment Considerations: Balancing Risk and RewardNetflix's third-quarter 2025 guidance projects solid fundamentals with 17% revenue growth to $11.5 billion and improved 31% operating margins, supported by membership expansion and doubling advertising revenues. However, the premium valuation and intensifying streaming competition warrant caution. While management has raised full-year targets to $44.8-$45.2 billion in revenues and 29.5% margins demonstrate operational strength, much of the upside reflects favorable foreign exchange movements rather than organic momentum. The second-half content slate appears robust, yet execution risks remain amid increasing content costs. Patience may reward investors seeking better risk-reward dynamics.ConclusionNetflix demonstrates strong operational execution with robust third-quarter guidance and improving margins, yet the premium valuation and competitive streaming landscape suggest limited near-term upside. Existing shareholders should maintain positions given solid fundamentals, but prospective investors would benefit from waiting for a more favorable entry point or stronger confirmation of sustained growth momentum beyond third-quarter results.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report The Walt Disney Company (DIS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks