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Netflix Shares Drop 10% as Investors Worry Over Valuation and Growth Outlook

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Netflix shares fell more than 10% on Wednesday after the company’s fourth-quarter forecast failed to impress investors, despite a slate of blockbuster titles including the final season of Stranger Things. The decline reflects growing concern that the streaming giant’s valuation — now trading at nearly 40 times forward earnings — has become unsustainably high.

The company reported third-quarter revenue of $11.5 billion, in line with expectations, and forecast $11.96 billion for the next quarter. However, investors were left uneasy by the lack of subscriber metrics since Netflix stopped reporting them earlier this year. Analysts said the market is looking for stronger signals of growth to justify the company’s lofty market position after a 360% stock surge over the past three years.

Netflix’s advertising and gaming divisions, launched to diversify its income, have yet to become major revenue drivers. Still, the company recorded its strongest ad sales quarter ever, without disclosing figures. A $619 million tax-related charge in Brazil also dragged down profits.

Analysts at Wedbush called Netflix’s outlook “underwhelming,” while Evercore ISI suggested buying the dip, noting rival platforms Disney+ and HBO Max have raised prices — potentially giving Netflix room to do the same.

Netflix Shares Fall 5.6% After Brazilian Tax Dispute Hits Quarterly Earnings

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Netflix (NFLX.O) shares dropped 5.6% in after-hours trading on Tuesday after the streaming giant missed Wall Street’s third-quarter profit estimates due to an unexpected $619 million tax expense in Brazil. Despite record ad sales and a promising year-end outlook, the extra charge dragged down earnings and overshadowed otherwise steady revenue growth.

For the quarter ending in September, Netflix reported net income of $2.5 billion, or $5.87 per share, missing analyst forecasts of $3 billion and $6.97 per share, according to LSEG data. Revenue met expectations at $11.5 billion, while operating margin reached 28% — a figure that would have exceeded 31.5% without the one-off tax payment.

The setback comes as Netflix pursues growth beyond streaming through advertising and video games, competing with YouTube, Amazon Prime Video, and Disney+. Analysts said the tax issue weighed on investor sentiment, though the company’s fundamentals remain strong. “All things considered, this was another robust quarter, despite a blip due to an unforeseen expense,” said PP Foresight analyst Paolo Pescatore.

For the fourth quarter, Netflix projected revenue of $11.96 billion, slightly above Wall Street’s $11.90 billion forecast, and earnings per share of $5.45, one cent ahead of estimates.

Executives also addressed ongoing industry consolidation, saying Netflix would remain selective. Co-CEO Ted Sarandos said the company has “no interest in owning legacy media networks” but may consider acquiring intellectual property. Co-CEO Greg Peters added that competitors’ mergers would not affect Netflix’s competitive position.

The company said it delivered its strongest ad-sales quarter to date, though it did not disclose figures. Analysts believe subscription fees will continue to drive the bulk of Netflix’s growth. “Sustained revenue growth will predominantly come from subscriptions,” said eMarketer’s Ross Benes.

Netflix will end 2025 with a packed lineup, including the final season of “Stranger Things” and two live NFL games on Christmas Day. “We’re finishing the year with good momentum and an exciting Q4 slate,” the company said in its shareholder letter.

Mattel and Hasbro Miss Holiday Window for “KPop Demon Hunters” Toys Despite Huge Netflix Success

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Fans eager to buy “KPop Demon Hunters” toys this holiday season will have to wait until next year, as Mattel (MAT.O) and Hasbro (HAS.O) will not ship most licensed products until January, missing the crucial shopping period. The two toymakers recently struck licensing deals with Netflix (NFLX.O) to produce dolls, games, and collectibles based on the hit animated film, which has become the streamer’s most-watched movie ever.

According to sources cited by Reuters, the companies underestimated the film’s crossover appeal among K-pop, anime, and casual audiences before its June release, delaying their licensing commitments. Typically, toymakers plan 12–18 months in advance to design, manufacture, and distribute merchandise before the holiday season, which generates roughly one-third of annual sales.

Netflix said the toys — including Mattel’s three-doll set and Hasbro’s Monopoly card game — will be available for pre-order soon but won’t arrive until early 2025. Funko (FNKO.O) will also release collectible figurines inspired by the movie’s characters, shipping by January 30, according to its website.

Mattel CEO Ynon Kreiz told Reuters the company is “fast-tracking development given the strong demand,” while Hasbro’s Tim Kilpin said such breakout hits are rare and exciting, noting that “new properties like this can surprise the market.”

Released in June, “KPop Demon Hunters” quickly became a global phenomenon, with its soundtrack single “Golden” topping Billboard’s Hot 100 and a theatrical sing-along release selling out in over 1,300 cinemas. The film’s success highlights Netflix’s growing push into merchandise licensing, a strategy long dominated by Disney and Warner Bros Discovery.

Industry experts said the missed opportunity stings at a time when toy companies face rising tariffs, high production costs, and competition from digital entertainment. Still, the hype surrounding “KPop Demon Hunters” could extend well into 2025 — potentially turning next year’s release of toys and collectibles into one of the industry’s biggest events.