Netflix Heads Into Q4 Earnings After Sharp Pullback, Testing the Bull Case

Netflix will report Q4 2025 earnings after market close on Tuesday, January 20, kicking off a heavy week of corporate results. The report comes at a critical moment for the streaming giant, whose shares have fallen roughly 28–34% from recent highs following a Q3 margin miss, resetting expectations and reopening the debate over valuation, growth durability, and margins.

Recent Performance: Solid Growth, Margin Disappointment

In Q3 2025, Netflix delivered headline growth that would typically be well received. Revenue rose 17% year over year to $11.5 billion, while earnings per share increased 9% to $5.87. The problem was profitability. Operating margin came in at 28.2%, well below the roughly 31.5% analysts were expecting, triggering a sharp selloff as investors reassessed the company’s cost structure and near-term margin trajectory.

Management’s guidance did little to immediately stabilize sentiment. For Q4, Netflix guided to revenue of approximately $11.9 billion, EPS of $5.45, and operating margin of 23.9%, implying continued margin compression into year-end. For full-year 2025, the company expects revenue of $45.1 billion and EPS of $25.12.

What’s Driving Investor Caution

Notably, there has been no single piece of catastrophic news. Instead, concerns are more structural and forward-looking.

First, while Q3 revenue and EPS grew, the earnings miss relative to some expectations reinforced fears that Netflix’s margin expansion phase may be stalling. Second, uncertainty around 2026 looms large. With U.S. subscriber penetration already high, investors are questioning whether Netflix can sustain premium growth rates without a new catalyst.

Live programming and the ad-supported tier remain key engagement drivers, but their long-term profitability is still being evaluated. Meanwhile, periodic speculation around potential consolidation — including rumors involving Warner Bros. Discovery — has added noise without concrete developments.

What the Market Will Be Watching in Q4

Heading into the report, analysts are looking for Q4 revenue closer to $12 billion and are focused less on raw subscriber numbers than on qualitative and monetization metrics. Advertising revenue growth, pricing power, engagement trends, and commentary on 2026 margins are likely to matter more than headline subscriber additions.

Earnings expectations vary across models, reflecting elevated uncertainty. That uncertainty is echoed by Morningstar, which currently rates Netflix a two-star stock with a high uncertainty rating and a $770 fair value estimate, citing margin pressure and a more competitive streaming landscape.

On the positive side, Netflix's exposure to tariffs and global trade friction remains minimal, insulating the company from one of the market's more significant macro risks.

Setup: Reset Expectations, Higher Stakes

With the stock significantly off its highs, Netflix enters Q4 earnings with expectations more tempered than they were earlier in the year. For bulls, that pullback creates a potential entry point if management can show margin stabilization and credible 2026 growth drivers. For skeptics, the report is another test of whether Netflix’s best days of operating leverage are already behind it.

Either way, Tuesday’s report is likely to set the tone not just for Netflix’s shares, but for how investors think about the next phase of the streaming industry’s evolution.