To The Moon

The narrative for Netflix has fundamentally shifted. Following its 2024 decision to stop reporting quarterly subscriber numbers in 2025, the focus is no longer on "subscriber growth at all costs." Instead, investors are now intensely focused on traditional financial metrics: revenue growth, operating margin, and free cash flow.

$Netflix(NFLX)$ upcoming fiscal third-quarter 2025 earnings is scheduled to be reported after the market close on Tuesday, October 21, 2025.

The company's advertising tier and password-sharing crackdown have been highly successful, and this quarter will be a critical test of their continued momentum and, more importantly, their ability to drive profitability.

Consensus Estimates & Guidance

Wall Street is looking for a very strong quarter of double-digit growth, driven by price hikes, ad revenue, and paid conversions from the password-sharing crackdown.

Netflix has a strong history of beating EPS estimates, having done so in each of the trailing four quarters.

Q2 2025 Earnings Summary: A "Beat and Raise" Met with a Shrug

On July 17, 2025, Netflix reported strong Q2 2025 results that beat analyst expectations, driven by price hikes and the continued, rapid growth of its advertising business. However, the stock fell over 2% in after-hours trading, signaling that the market's high expectations were already priced in.

Key Q2 2025 Financial Results:

Adjusted Revenue: $11.08 billion, a 15.9% increase year-over-year and in line with estimates.

Adjusted EPS: $7.19, a 47.3% increase year-over-year and a beat of the $7.07-$7.09 consensus.

Operating Margin: 34.1%, a significant expansion from 27.2% in the prior-year quarter.

The company's performance was bolstered by price increases in key markets and the successful rollout of its proprietary ad-tech platform, the "Netflix Ads Suite." Management reaffirmed its goal to double advertising revenue in 2025 and noted that its ad-supported tier had grown to an estimated 94 million monthly active users globally as of mid-2025.

The Guidance & Key Lesson Learned

The most important part of the report was Netflix's forward-looking guidance, which provided a crucial lesson for investors.

The Q2 2025 Guidance:

Raised Full-Year 2025 Revenue: Netflix increased its full-year 2025 revenue forecast to a range of $44.8 billion - $45.2 billion (up from $43.5 - $44.5 billion).

Raised Full-Year 2025 Operating Margin: The company also raised its full-year 2025 operating margin target to 29.5% (up from 29%).

Strong Q3 2025 Forecast: Management guided for Q3 revenue of $11.53 billion, which was ahead of analyst expectations.

Lesson Learned: A High Valuation Demands More Than Just a "Beat and Raise"

The key lesson from Netflix's Q2 report was that for a stock trading at a premium valuation, meeting and even raising expectations is not always enough to send the stock higher.

"Priced for Perfection": The stock had already rallied more than 40% year-to-date leading up to the report. This meant the market had already priced in a strong "beat and raise" scenario.

The New Normal: The company's successful pivot to advertising and its password-sharing crackdown are no longer new catalysts; they are now the expected baseline. The market reaction showed that investors are now "selling the news" because the good news was already understood.

Focus Shifts to 2026: With 2025's strong performance all but confirmed, investor focus immediately shifted to 2026. The guidance, while strong, did not provide a new, explosive catalyst to justify another leap in the stock's already-high ~44x forward earnings multiple.

In short, Netflix's Q2 report confirmed its business is executing flawlessly, but the stock's post-earnings dip taught investors that when expectations are this high, even a stellar report can be met with a shrug if it doesn't provide a new reason to be bullish.

Key Metrics Investors Must Watch

Since paid net additions are no longer the primary metric, here is what Wall Street will be dissecting:

Average Revenue per Membership (ARM/ARPU): This is the new "subscriber growth." Investors want to see this number climb, driven by a combination of price increases and the successful migration of users to paid plans.

Advertising-Tier Performance: While Netflix won't give a specific subscriber number, it will provide qualitative updates. Management has guided to doubling ad revenue in 2025. Investors will need to see commentary that confirms they are on track, driven by the new in-house ad-tech platform and strong upfront ad sales. As of mid-2025, an estimated 94 million users were on the ad-plan.

Operating Margin: Netflix guided to 31% for Q3. Hitting or exceeding this target is non-negotiable for a stock with its premium valuation. Management's commentary on the full-year 2025 operating margin (currently forecast at 29.5%) will also be key.

Q4 2025 Guidance (The Most Important Metric): The stock's post-earnings move will be almost entirely dependent on the forecast for the critical holiday quarter. Any perceived weakness in the Q4 revenue or operating margin forecast will be heavily punished.

Content Slate & Engagement: Listen for management's comments on the performance of its Q3 content (like Squid Game Season 3) and its upcoming Q4 slate (Stranger Things Season 5). Netflix is pivoting to an "engagement" metric, and this commentary will be the only insight into the health of its user base.

Netflix (NFLX) Price Target

Based on 45 analysts from Tiger Brokers offering 12 month price targets for Netflix in the last 3 months. The average price target is $1,362.08 with a high forecast of $1,600.00 and a low forecast of $757.12. The average price target represents a 15.17% change from the last price of $1,199.36.

Short-Term Trading Analysis & Opportunities

Netflix is notoriously volatile post-earnings. Historical data shows the stock has an average absolute move of 11.4% following its last 12 quarterly reports.

Current Setup:

Valuation: The stock is trading at a premium, with a forward P/E of over 38x. This is well above its five-year median and the industry average.

Implied Volatility: The options market is pricing in a 7.4% move in either direction.

The "Volatility Squeeze": Interestingly, this 7.4% implied move is lower than the stock's historical average. This is because the last earnings report in July saw a very small move. Some analysts believe this means the market is underpricing the potential for a surprise, setting up a potentially larger-than-expected reaction.

Potential Scenarios & Trades:

Bullish Scenario: The "Beat and Raise"

What it looks like: Netflix beats EPS/revenue estimates and, most importantly, issues Q4 2025 guidance that is significantly above Wall Street expectations. Any positive surprise on ad-revenue momentum would be a major catalyst.

Potential Trade: This would confirm the high valuation is justified and likely send the stock gapping up. A short-term long position (buying call options or a call spread) would benefit. Given the (relatively) low implied volatility, a long straddle (buying both a call and a put) could be profitable if the move is larger than the 7.4% priced in, regardless of direction.

Neutral-to-Bearish Scenario: The "In-Line" Report

What it looks like: Netflix meets its numbers but issues Q4 guidance that is merely "in-line" with expectations.

Potential Trade: This is a classic "sell the news" setup. At its current premium valuation, "in-line" is not good enough. The stock has rallied ~37% year-to-date and would be vulnerable to a pullback as high-expectation investors take profits. A short position (buying put options or a put spread) would be favored here.

Bearish Scenario: The "Guidance Miss"

What it looks like: Netflix misses on revenue or, more likely, guides for Q4 revenue or operating margin below consensus. Any hint that ad-revenue growth is slowing or that price hikes are causing churn would be disastrous.

Potential Trade: This would be severely punished. The high valuation provides no support, and a sharp sell-off would be expected. A long put position would be the most direct way to trade this.

Technical Analysis - Exponential Moving Average (EMA)

We are seeing NFLX trying to make a recovery after experiencing a downside, but the RSI momentum remain positive, so investors might want to watch out for the shrug as it did happen after it had a “beat and raise” earnings for Q2.

But the headwinds and high valuation might hit its share price as competitors are also ramming up their operations for better margins, so I would think to monitor how NFLX earnings might come up, as there is a possibility of a shrug even if Q3 could provide a “beat and raise” earnings.

Summary

As Netflix (NFLX) approaches its Q3 2025 earnings release on October 21, analyst focus has shifted from subscriber counts to monetization and profitability.

Wall Street consensus aligns closely with Netflix's guidance. Revenue is expected to be around $11.52 billion, representing approximately 17% year-over-year growth. Earnings per share (EPS) are projected to be near $6.89, a significant jump of about 27-29% from the prior year.

Key drivers for this performance include continued membership growth, the full effect of 2025 price increases, and the rapid expansion of the ad-supported tier, which is reportedly nearing 100 million users. Advertising revenue is a critical focal point, with expectations for it to double in 2025.

Investors will also be closely watching for margin expansion, with the company forecasting a 31% operating margin for the quarter. While Netflix will no longer report quarterly subscriber numbers, commentary on engagement and the performance of its strong content slate, including "Squid Game Season 3," will be essential.

Appreciate if you could share your thoughts in the comment section whether you think NFLX could avoid the shrug if it could continue a “beat and raise” Q3 guidance.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.