To The Moon

$Netflix(NFLX)$ is scheduled to report its fiscal fourth-quarter 2025 earnings on Tuesday, January 20, 2026, after the market closes.

This earnings report is particularly high-stakes as Netflix enters a "transitional" era. For the first time, investors are grappling with the potential impact of its massive proposed acquisition of Warner Bros. Discovery (WBD), while also adjusting to the company's decision to stop providing quarterly subscriber guidance.

Q4 2025 Forecast: The Consensus Numbers

The market is expecting solid top- and bottom-line growth, but attention has shifted toward profitability and ad-tier scaling.

Netflix’s fiscal Q3 2025 earnings, reported on October 21, 2025, were a classic "mixed bag" that highlighted both the company's operational strength and the inherent risks of its massive global scale.

Q3 2025 Financial Summary

The report was defined by a steady top line but a significant "paper" miss on the bottom line due to a specific international headwind.

• Revenue: $11.51 Billion (up 17% YoY), hitting the mark on analyst expectations.

• Earnings Per Share (EPS): $5.87, which was a notable miss compared to the $6.96 consensus.

• Operating Margin: 28.2%, falling short of the company’s own 31.5% guidance.

• Ad-Tier Progress: Management confirmed they reached 190 million monthly active viewers (MAV) on the ad-supported tier, signaling that their "second engine" is scaling rapidly.

The "Brazil Hit": What Happened?

The primary reason for the EPS and margin miss was a one-time $619 million tax expense related to a long-standing dispute with Brazilian tax authorities.

• The Context: This charge covered a period from 2022 through 2025.

• The Impact: Excluding this non-recurring charge, Netflix's operating margin would have been approximately 33%, which would have actually exceeded guidance.

Lessons Learned from the Q3 Guidance

The stock's reaction—a roughly 10% drop on the following day—provides three critical lessons for investors as they look toward the upcoming Q4 report.

Markets Prize "Profit Quality" over "User Quantity"

Because Netflix stopped providing quarterly subscriber guidance in 2025, the market has become hyper-sensitive to margin fluctuations. Even though the Brazil tax issue was a "one-off," it served as a reminder that as Netflix grows internationally, it faces complex regulatory and tax risks that can suddenly erode profit, regardless of how many people are watching Squid Game.

"Priced for Perfection" is a Double-Edged Sword

Going into Q3, Netflix was trading near all-time highs with a high P/E ratio. The lesson here is that when a stock is "priced for perfection," any deviation from guidance—even if explained by a non-operational tax event—will often trigger a "sell first, ask questions later" reaction from institutional algorithms.

The Shift to "Transitional Metrics" (MAV)

Netflix has moved away from reporting "Net Adds" (new subscribers) toward Monthly Active Viewers (MAV) for its ad tier. The lesson for investors is that the composition of the user base is now more important than the total number. A user on an ad-tier plan may eventually be more valuable (via ARPU) than a basic-tier subscriber, but the market is still learning how to value this new MAV metric.

Looking Ahead to Q4

For the upcoming Q4 report on January 20, the "lesson" from Q3 suggests that management's commentary on the Warner Bros. Discovery merger will be the new "margin-defining" story.

Key Metrics & Themes to Watch

Investors are looking beyond "subs" to determine if Netflix can successfully transition from a growth stock to a high-margin cash cow.

1. Advertising Momentum:

Netflix aim is to double ad revenue in 2025. This quarter will be the litmus test for whether holiday season ad spend significantly boosted the bottom line. Watch for the Ad-Tier ARPU (Average Revenue Per User) vs. the Standard/Premium tiers.

2. The Warner Bros. Discovery (WBD) Deal:

This is the "elephant in the room." Shares have recently been under pressure due to the $82.7 billion price tag and regulatory concerns. Management’s commentary on financing and integration will likely move the stock more than the actual earnings numbers.

3. Operating Margins & Free Cash Flow:

As the company matures, its ability to expand margins while maintaining a heavy content slate ($17B+ annually) is critical. Strong free cash flow could signal more aggressive share buybacks, which would support the stock price.

4. Content Slate & Live Sports:

The success of live events (NFL Christmas games, high-profile boxing) is a new KPI. Success here proves Netflix can capture "appointment viewing" ad dollars traditionally reserved for linear TV.

Netflix (NFLX) Price Target

Based on 43 analysts from Tiger Brokers app offering 12 month price targets for Netflix in the last 3 months. The average price target is $124.39 with a high forecast of $152.50 and a low forecast of $77.31. The average price target represents a 41.35% change from the last price of $88.00.

Short-Term Trading Analysis

The stock has been in a defined downtrend since mid-2025, recently trading near the $88–$90 range—a significant drop from its June highs of $134.

Bull Case (Long Opportunity)

• The Setup: A "Beat and Raise" on EPS plus clarity on the WBD deal structure (e.g., less dilution than feared).

• Targets: If the stock breaks above the $94 resistance, it could quickly test $100 (the 50-day SMA). A bullish "gap up" could target the $115–$117 level where the downtrend line currently sits.

Bear Case (Short Opportunity)

• The Setup: Softening U.S. subscriber trends or a "miss" in ad revenue growth. Negative sentiment surrounding the WBD acquisition costs could also trigger a sell-off.

• Targets: If the stock fails to hold the $88 support, technical analysts point to a "trap door" down to the $82.11 - $85.45 range (the April 2025 lows).

Volatility Play

Options markets are currently pricing in a significant move. For those wary of direction, a Straddle (buying both a call and a put) might benefit from the high implied volatility surrounding the merger news and the new reporting structure.

A long straddle on Netflix (NFLX) is an options strategy used when anticipating significant volatility—a large price move in either direction—without a strong bias on the direction itself. As of January 2026, Netflix straddles have been identified as potentially undervalued when compared to historical, larger-than-average moves in the stock, particularly around earnings. 

Technical Analysis - Exponential Moving Average (EMA)

We are seeing a pretty long sharp decline on NFLX since we start 2026, so this raise concern to investors on whether this volatility would be moving into its earnings coming up tomorrow (20 Jan), this is surrounding the merger news and the new reporting structure.

So a beat on ad revenue plus positive 2026 guidance could trigger a "relief rally", but if management remains vague on the WBD deal or if margins compress due to content costs (NFL games, Stranger Things finale), the stock could drop to the $82.11 - $85.45 range, levels not seen since early 2025.

I think that investors are looking at "earnings quality"— specifically whether live sports and ads can offset slowing core subscriber growth in mature markets. So I would watch how the price action played out on Tuesday (20 Jan) when trading resume after the holiday on Monday (19 Jan).

Summary

Netflix (NFLX) is scheduled to report its Q4 2025 earnings on Tuesday, January 20, 2026, after the market closes. Following a volatile 2025 where the stock dropped over 30% from its June highs, this report is seen as a critical test of Netflix’s "Phase 2" growth strategy.

Financial Estimates & Key Metrics

Wall Street is looking for continued double-digit growth, though focus has shifted from subscriber counts to high-margin revenue streams.

• Revenue: Consensus sits at $11.97 billion (+16.8% YoY).

• Earnings Per Share (EPS): Expected at $0.55 (+28% YoY).

• Ad-Tier Scaling: Investors are watching for ad revenue to top $1 billion for the quarter, supported by 190M monthly active viewers (MAV) and holiday ad spend.

• 2026 Guidance: With U.S. market saturation, any forecast below 13% revenue growth for 2026 could spark a sell-off.

The "Warner Overhang"

The biggest driver for the stock is currently the proposed $82.7 billion acquisition of Warner Bros. Discovery (WBD).

• The Risk: Investors fear high debt loads and regulatory hurdles. A "bidding war" with Paramount Skydance has added uncertainty.

• The Opportunity: If management provides a clear, non-dilutive financing plan, it could remove the "merger overhang" that has suppressed the stock price.

Trading Analysis: Short-Term Outlook

The stock is currently testing a major support floor near $88–$90.

• Bull Scenario: A beat on ad revenue plus positive 2026 guidance could trigger a "relief rally." The first technical target is $94, with a secondary break toward the $100 psychological barrier.

• Bear Scenario: If management remains vague on the WBD deal or if margins compress due to content costs (NFL games, Stranger Things finale), the stock could drop to the $82.11 - $85.45 range, levels not seen since early 2025.

Bottom Line: Q4 results will be judged on "earnings quality"—specifically whether live sports and ads can offset slowing core subscriber growth in mature markets

Appreciate if you could share your thoughts in the comment section whether you think Netflix earnings would be affected by the warner overhang and bidding war, could we see a strong earnings quality from Netflix to overcome these headwinds.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.