Shares of Netflix Inc. (NASDAQ:NFLX) fell sharply after the company’s third-quarter 2025 earnings report disappointed investors. While revenue came in line with forecasts, profits missed expectations — triggering a sell-off that may actually present a golden opportunity. Here’s why it makes sense to buy the dip in Netflix stock despite short-term weakness.
Netflix’s Q3 Earnings Miss Explained
For the quarter ended Sept. 30, 2025, Netflix reported revenue of $11.51 billion, up 17% year-over-year, matching Wall Street’s estimates. However, the company’s operating margin came in at 28%, below the 31.5% Netflix had projected. This miss stemmed from a $619 million tax expense in Brazil, which the company had not included in prior forecasts.
As a result, earnings per share (EPS) fell short at $5.87, compared with analysts’ expectations of $6.89. Netflix clarified that excluding the one-time Brazil tax issue, results would have exceeded its margin guidance. Management also stated that this matter should not materially affect future earnings.
Despite the profit shortfall, Netflix continues to project 17% revenue growth in Q4, supported by membership increases, higher ad sales, and selective pricing adjustments. Co-CEO Gregory Peters described the company’s overall position as “very healthy,” citing strong engagement and record viewing shares in both the U.S. and U.K.
Reasons to Buy the Dip in Netflix Stock
1. Ad Business Momentum
One of Netflix’s most promising growth engines is its advertising business, which is on pace to more than double in 2025. Although Netflix doesn’t disclose specific ad revenue figures, management reaffirmed that its advertising segment continues to scale rapidly. Peters suggested the company feels “good about our growth trajectory,” even if future ad revenue doesn’t double annually.
With advertisers eager to reach Netflix’s massive global audience, the company’s ad tier could become a significant profit driver in the years ahead. For long-term investors, this is a compelling reason to buy the dip in Netflix stock.
2. Expanding Into Live Events
Netflix has been aggressively building its live entertainment portfolio to increase user engagement. The company has secured broadcasting rights for the 2027 and 2031 FIFA Women’s World Cups in the U.S. and Canada, as well as a three-season deal for Christmas Day NFL games. It has also partnered with World Wrestling Entertainment, expanding its reach into sports entertainment.
Live events keep users on the platform longer, enhance retention, and justify premium subscription pricing — strengthening Netflix’s moat against competitors like The Walt Disney Company (NYSE:DIS).
3. Gaming as a New Frontier
Netflix is positioning itself in the $140 billion global gaming market (excluding China and Russia), viewing it as a complementary addition to its streaming ecosystem. The company currently earns no ad revenue from gaming but sees future potential in both engagement and monetization. By expanding into gaming, Netflix is diversifying beyond streaming and creating new revenue streams for the long term.
4. Merchandise and Brand Expansion
Netflix is also developing merchandise partnerships with Mattel Inc. (NASDAQ:MAT) and Hasbro Inc. (NASDAQ:HAS) to sell products tied to its original franchises, such as KPop Demon Hunters. As Netflix continues to produce popular characters and content, merchandise could become a meaningful addition to its revenue mix.
A Long-Term Buy Despite Short-Term Volatility
Co-CEO Ted Sarandos summed it up best during the earnings call: “The most important thing we have to do is thrill our audiences. The revenue from advertising or subscription is a reward for thrilling the audience.”
That mindset has helped Netflix stay ahead of rivals in a fiercely competitive streaming market. While some peers like Disney struggle to grow subscribers, Netflix continues to add members and raise prices successfully.
Valuations have long been a concern, but after the recent pullback, Netflix stock looks more attractive. The Q3 miss was largely driven by a one-time tax issue rather than operational weakness. With its ad business accelerating, live event deals expanding, and gaming and merchandise strategies gaining traction, Netflix’s growth story remains strong.
For patient investors, this correction offers a smart chance to buy the dip in Netflix stock — before the next wave of growth begins.
Featured Image: Freepik © Flowo
