Netflix on Tuesday said its third quarter revenue jumped 17% to $11.5 billion, powered by the hit animated film, “KPop Demon Hunters.”
The Los Gatos-based streamer reported net income of $2.5 billion during the third quarter, up 8% from the same period a year ago but well below the $3 billion analysts had projected, according to FactSet.
Revenue was in line with analyst estimates and was boosted by increased subscriptions, pricing adjustments and more ad revenue.
The company said it incurred a $619 million expense related to a dispute with Brazilian tax authorities.
“Absent this expense, we would have exceeded our Q3’25 operating margin forecast,” Netflix said in a letter to shareholders on Tuesday. “We don’t expect this matter to have a material impact on future results.”
Netflix shares, which closed Tuesday at $1,241.35, fell 5% in after hours trading.
As it continues to dominate the streaming market with more than 301 million subscribers, Netflix has been investing in a diverse slate of content, including new movies rolling out in the fourth quarter like Guillermo del Toro’s “Frankenstein,” as well as the final season of sci-fi hit “Stranger Things” and family-friendly games for the TV such as Boggle.
“KPop Demon Hunters” has garnered more than 325 million views in its first 91 days on the service. The movie, about a trio of powerful singers who hunt demons, was released in June.
It bested 2021 action film “Red Notice,” which had been previously its most watched film in its first 91 days on Netflix with 230.9 million views.
On Tuesday, Netflix also announced a licensing deal with toy makers Hasbro Inc. and Mattel Inc. to make toys including dolls, action figures, youth electronics and other items related to “KPop Demon Hunters.”
Popular TV shows launched in the third quarter include the second season of the Addams family spin-off series “Wednesday” and the second season of drama “My Life With the Walter Boys.”
“When you have a hit the size of KPop Demon Hunters, it stirs the imagination of where you can take this,” said Ted Sarandos, co-CEO of Netflix in an earnings presentation.
He said the film benefited from Netflix’s platform, allowing super fans to repeat view it and make it appealing for audiences to watch in theaters as well. “We believe this film, KPop Demon Hunters, actually worked because it was released on Netflix first,” Sarandos added.
The company said in the fourth quarter it expects revenue to grow another 17% due to growth in subscriptions, pricing and ad revenue.
For the full year, Netflix is forecasting revenue of $45.1 billion, up 16%, and said it is on track to more than double it ad revenue in 2025.
Like other entertainment companies, Netflix has been taking steps to diversify its business in a challenging landscape, as production costs for TV and movies increases and studios consolidate.
“With entertainment industry employment becoming more precarious, Netflix is slyly pivoting its content strategy to rely more on live sports, YouTubers, creators and podcasters,” said Ross Benes, a senior analyst with research firm Emarketer in a statement.
But some investors still remain skeptical about the future of subscription streaming services, as the technology behind video generation tools powered by AI get more sophisticated, making it easier to replicate visual effects and customize content to viewers.
“Netflix’s core lay-back easy to watch scripted content is potentially most at risk by the emergence of generative AI compared to peers,” said John Conca, analyst with investment research firm Third Bridge. “Netflix will need to channel its earlier days and find away to remain nimble, even though it’s now the 800-pound gorilla in this space to deal with this threat.”
On Tuesday, Netflix said it is using generative AI to improve the quality of its recommendations and content discovery on its platform. Creators on Netflix are also using AI tools for their projects, including filmmakers for comedy “Happy Gilmore 2” using generative AI and volumetric capture technology to de-age characters.
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