By Hernan Lopez.
Companies mentioned: Amazon, Disney, Netflix, Spotify, Warner Bros
Questions answered: What would the impact be on Operating Income of a 0.5% churn reduction for Netflix and Spotify? How about a 10% increase in gross adds?
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Netflix reported Q3 earnings on Tuesday, and behind an impressive 17% y/y revenue growth, there were a few surprises.
Operating income came in at $3.25B vs guidance of $3.6B, due to a $0.6B four-year catch-up accrual of disputed Brazilian taxes. Adjusting for it, OpInc would have grown 33% y/y.
The company did not quite brag about engagement growth. Greg Peters said it had grown ‘a bit faster’ in Q3’25 than in 1H25 (when it rose 1%), adding they expect ‘steady growth in viewing hours over time.’
But there was a bigger question in investors’ heads: Would Netflix try to buy Warner Bros?