Netflix (NYSE: NFLX) Q3 Earnings Deliver Growth, But Valuation Demands Perfection

Netflix (NASDAQ: NFLX) just delivered another strong quarter, and investors are watching closely. Revenue climbed 17% year over year to USD 11.5 billion, right in line with expectations, while operating margins came in slightly lower at 28% due to a one-off tax payment in Brazil. Excluding that charge, Netflix would have beaten consensus estimates a sign that its core business remains resilient even amid unexpected costs.

What stands out is the consistency. Few streaming companies have managed to combine double-digit growth with expanding profitability, and Netflix continues to prove it can do both. With net income up 8% to USD 2.55 billion and management guiding for 16% full-year revenue growth and a 29% margin, the outlook remains confident.

But with subscriber saturation rising and content costs still climbing, the question for investors is clear: how much more upside is left in the world’s biggest streaming platform?

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Netflix Sees Double-Digit Growth Across Asia and Europe

Netflix’s strongest revenue growth in the quarter came from Asia Pacific, up 21% to USD 1.37 billion, followed by Europe, the Middle East, and Africa, which rose 18% to USD 3.7 billion. This performance highlights the company’s expanding global footprint and growing subscriber base outside the United States. Despite some margin compression, underlying profitability remained stable, supported by the continued success of its ad-supported tier, which is improving monetisation per user. Ongoing investment in content efficiency has also helped contain costs and support earnings quality.

Netflix Invests Heavily in AI and Ad Tech to Power Its Next Growth Phase

For investors, it is equally important to understand where Netflix is directing capital to drive its next phase of growth. This quarter, technology and development spending increased 16% to USD 854 million, primarily focused on advancing artificial intelligence tools, advertising technology, and recommendation algorithms. These investments signal Netflix’s commitment to strengthening its platform, enhancing user engagement, and maintaining a competitive edge in the evolving streaming landscape especially with AI.

Capital expenditure rose 30% to USD 165 million, primarily directed toward expanding production facilities and strengthening advertising technology. Content additions reached USD 4.65 billion, supported by new licensing agreements with Mattel and Hasbro for the upcoming K-Pop Demon Hunters franchise, as well as an expanded partnership with Amazon’s Demand Side Platform to enhance programmatic advertising reach.

Netflix’s Strong Cash Flow Supports Premium Valuation — but Leaves Little Room for Error

From a cash flow perspective, Netflix maintained a strong position, generating USD 2.66 billion in free cash flow compared with USD 2.19 billion in the prior period. On valuation, Netflix appears fairly to slightly overvalued on a multiples basis, currently trading around 16–17 times EBITDA. While this represents a modest premium to peers, it is supported by the company’s superior profitability and consistent revenue growth. However, at these levels, the share price leaves limited margin for error, meaning continued execution will be key to sustaining investor confidence.