Netflix, Inc.

Good afternoon, and welcome to the Netflix Q3 2025 earnings interview. I'm Spencer Wong, VP of Finance, IR, and Corporate Development. Joining me today are co-CEOs Ted Sarandos and Greg Peters, and CFO Spence Newman. As a reminder, we will be making forward-looking statements, and actual results may vary. We'll now take questions submitted by the analyst community, and we will start with our results and outlook. Our first question comes from Ben Swinburne of Morgan Stanley. who asks, as you begin to wrap up 2025 and look to 2026, can you talk broadly about the health of the business and how you would frame the opportunity ahead?

We think the business is very healthy. We feel good about our progress on our key initiatives. We've got also a lot of opportunity ahead of us, but we've got a lot of work we need to do to accomplish and fully realize those opportunities. So what's working? We had a good Q3. We had revenue in line with expectations. Our operating income would have exceeded our forecast absent the Brazilian tax matter. We're also seeing good progress against our key priorities. So engagement remains healthy. We achieved record share of TV time in Q3 in both the US and the UK. We recorded our best ad sales quarter ever. We are now on track to more than double ad revenue this year. We're continuing to build out both live offerings and games. These are the emerging capabilities. On the live side, we saw Canelo Crawford. That was the most viewed men's championship fight this century. We recently announced the ability to play Netflix games on TV with friends and family playing together at home using just that TV and the phone as the game controller. So this progress in these areas is indicative of how we think we can best compete and grow the business over the long term. We focus on a few key areas that we think matter the most, and then we work hard to deliver continuous improvement in those areas. It sounds super simple, but building a real at-scale global streaming business is hard because you've got to combine great tech product and great content from all around the world, and we believe we can continue to improve in both those areas. But Ted, maybe you want to comment on that?

Yeah, I would just say, you know, looking ahead, we continue to have a massive opportunity since we're only about 7% of the addressable market in terms of consumer spending and only about 10% of time spent on TV in our biggest market. So enormous room for profitable growth in the core business. And, um, this is a very exciting time in terms of a lot of innovation, a lot of competition. Uh, but that's been true for the last 25 years. Uh, and one thing as a company, we've always embraced change. We thrive on competition. It pushes us to improve the service even faster for our members. Back at the beginning, in the early DVD days even, and now in streaming and global streaming of original content, we compete with the biggest players in the world, tech and media. And as you see, we keep growing engagement, revenue, and profit. So, you know, today we're an entertainment company. We program for an audience that's approaching a billion people around the world. We're producing series and films for local audiences in multiple markets. Many of those films and series resonate around the world. And a really great example of that, I think, is this summer's K-Pop Demon Hunters. Obviously a smash hit, but it's also emblematic of exactly what we're trying to do every day. In fact, feature animation is an example of that continuously improving the core. We've been grinding away at original feature animation for a few years now, and K-Pop Demon Hunters is our most popular film ever. And again, it proves our ability to create breakthrough hits and move the culture. Today, we announced Mattel and Hasbro have been named the Global Co-Master Toy Licensees for K-Pop Demon Hunter. This is a rare, maybe unprecedented partnership for them, and we're going to need them both to help meet the massive demand for K-Pop. fans to get closer to their characters off-screen every day. We're here to entertain the world, and we're delivering tremendous value to our members every day. When you have a hit the size of K-Pop Demon Hunters, it stirs the imagination of how big we could take this, as long as we keep improving on the core business every day. So we feel great about the business, and as Greg said, we are as energized as ever.