Netflix announced its third-quarter results!

First Quarter Expectations and Performance

Netflix (NFLX) will release its third-quarter earnings report on Tuesday. Investors are eagerly awaiting updates on the advertising business and live programming following the stock's volatile trajectory. Since the beginning of the year, shares have gained about 40%; however, in recent months, they have lagged behind the broader market and technology competitors. This situation has raised questions about viewership growth, valuation, and new competition from AI-powered content platforms.

Wall Street Expectations

According to Bloomberg consensus estimates, Wall Street forecasts for this quarter are as follows:

• Revenue: $11.52 billion (last year it was $9.82 billion); Netflix guidance: $11.53 billion
• Earnings per Share (EPS): $6.94 (last year it was $5.40); Netflix guidance: $6.87

Netflix no longer reports detailed member growth data.

Live Events and Content Successes

Analysts believe the results will be supported by a steady flow of content and strong performance in the live events business. In this context, the Canelo vs. Crawford fight attracted more than 41 million viewers worldwide, making it the most-watched championship boxing match of the century.

Additionally, the animated film KPop Demon Hunters has become Netflix's most-watched film, reaching 325 million views. This demonstrates the platform's ability to create massive hits from unrecognized intellectual property once again.

Positive Advertising Momentum

Beyond headline results, investors will focus on Netflix’s advertising momentum. This business segment is expected to be a dominant growth engine by 2026. Netflix recently expanded its advertising reach with a new Amazon (AMZN) DSP integration, enabling marketers to explore new ways to purchase inventory on the platform.

JPMorgan analyst Doug Anmuth noted that this move will “support advertiser onboarding, flexible acquisition, and measurement.” Additionally, advertising spending is expected to increase across 11 markets starting this quarter.

Competition and Market Risks

According to analysts, Netflix's advertising revenue is projected to rise from $1.4 billion in 2024 to $2.9 billion in 2025, and by 2026, it could increase by 45% to $4.2 billion.

Last month, Netflix announced a new video podcast partnership with Spotify (SPOT). This collaboration will feature some shows from Spotify Studios and The Ringer on Netflix starting in early 2026.

However, some Wall Street analysts point out that the high valuation of the stock reduces margin for error. Netflix is valued at around 45 times forward earnings. Analysts suggest that optimism regarding ad-layer growth and engagement has largely been reflected in the stock price.

Additionally, reports indicating that Paramount Skydance (PSKY) is evaluating a bid for Warner Bros. Discovery (WBD) could transform the streaming market. Analysts from JPMorgan and Bank of America do not see Netflix making a move for Warner Bros. and state that a combined Paramount-Warner Bros. would not pose an immediate threat.

Morgan Stanley analyst Ben Swinburne highlighted long-term risks associated with artificial intelligence. While the technology may change video production and distribution, he does not consider it an immediate threat.

Finally, Elon Musk caused controversy by calling for users to cancel their Netflix subscriptions. Following this, Netflix shares dropped by 5%.