Update shared on 21 Nov 2025
Fair value Decreased 92%Update following the Q3 2025 Earnings Report
Tail winds
- Revenue increased 17.2% YoY, driven primarily by membership growth and higher pricing which was higher that the revenue I used after Q2 earnings report
- Company achieved highest quarterly viewing share ever
- All regions experienced healthy YoY revenue growth. UCAN increased 17%. EMEA 18%. Asia-Pacific surged 21%
- Operating income totaled $3.25B, up 12% YoY
Head winds
- Earnings miss ($5.87 per share, missing by 14.8% the ZCE). Still, earnings grew 8.7% YoY.
- Earnings miss is mainly attributable to the $619M expense related to ongoing dispute with Brazilian tax authorities. Without this event, Netflix would have exceeded the operating margin forecast. Because the tax involves a 10% levy only on certain payments made by Brazilian entities to operations outside the country, the company considers it should not have a material impact.
Update FV summary
I remain bullish in Netflix. Absent the Brazilian tax expense, Netflix would be a high quality business, with high share/engagement and areas other than UCAN seem to be growing at same pace.
I am updating the revenue growth for the next 5y to 8% to be more conservative and Profit Margin to be on 29% instead of current 28% as it was because of the Brazilian tax dispute.
With this conservative review, NFLX is still 29% undervalued
Disclaimer
DownUnder is an employee of Simply Wall St, but has written this narrative in their capacity as an individual investor. DownUnder holds no position in NasdaqGS:NFLX. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimate's are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.