Copyright The Hollywood Reporter
Netflix saw its profits continue to surge in Q3, though margins missed the company’s own guidance due to an unusual dispute with tax authorities in Brazil. The company said that were it not for the Brazil matter, it would have beat its forecast, and that it does not expect it to have a material impact on future results. The streaming giant reported total revenues of $11.5 billion, operating income of $3.2 billion and a margin of 28.2 percent, all up double digits from a year ago. Netflix is no longer releasing its subscriber figures, choosing instead to put its focus on revenue and income, as it experiments with different revenue models like advertising, and with the price of subscriptions in different markets remaining somewhat variable. The Netflix results in Q3 continue a trend that the company saw in Q2, with revenue and profits soaring despite the tough competitive environment, underscoring the platform’s dominance in the space. It also highlighted a return to performance on its engagement, noting that Q3 was its “highest quarterly view share ever in the US and UK.” Looking ahead, Netflix is guiding toward revenue growth of 17% in the quarter, reflecting improvements in pricing, membership ads and ad revenue. Full year revenue is guiding toward $45.1 billion, in line with expectations, and a margin of 29% (down from 30%) reflecting the Brazilian tax matter. Coming in to the quarter, Wall Street was hoping to get more clarity from Netflix on the opportunities and risks associated with artificial intelligence, though it also expected executives to take a victory lap on KPop Demon Hunters. Earlier today the company announced wide-ranging deals with both Mattel and Hasbro for toys, games, collectibles and other products based on the franchise. The company says that its advertising business is on track to double in 2025 (albeit of of a small base) and the company is projecting continued growth there. “In Q4, we are using AI to test new ad formats, to generate the most relevant ad creative and placement for members, and for faster development of media plans,” the company wrote in its letter. “With these advancements, we’ll be able to test, iterate, and innovate on dozens of ad formats by 2026.”
