(Photo by Mario Tama/Getty Images)

As Netflix drops on earnings miss, it’s investing just $0.40 into content for every $1 of revenue

Netflix shares fell in after-hours trading on Tuesday, following the release of the streamer’s third-quarter earnings report.

Max Knoblauch

Netflix investors bailed out of the company’s stock after the streamer posted its worst earnings miss in years.

Shares dropped 5.6% in recent after-hours trading.

Netflix posted third-quarter earnings of $5.87 per share, below analyst expectations of $6.97, marking the biggest earnings miss since 4Q 2022. It reported revenue of $11.51 billion, in line with the consensus of analysts polled by FactSet and up 17% from last year.

While Netflix’s revenue base keeps growing, the streamer is reinvesting a lower percentage of that revenue back into content. When the first season of “Stranger Things” debuted on Netflix in the third quarter of 2016, the company was investing more money into content than it was making in revenue ($2.44 billion vs. $2.29 billion).

At the time, for every $1 of revenue, Netflix put $1.07 into creating or acquiring new shows or movies.

Nine years later, with the fifth and final season of Netflix’s premier franchise set to debut next month, the streamer’s strategy has shifted. In Tuesday’s earnings report, for every $1 of revenue Netflix made in Q3, it invested $0.40 into content.

That’s above the $0.35 it invested last quarter, but significantly below the $0.73 it posted in the fourth quarter of 2021 before its “Black Tuesday” earnings report cratered the stock in 2022 and led to big shifts in the streamer’s content spending strategy. While it may be rough for Hollywood, Wall Street certainly enjoys the idea of spending less and making more.

Of course, the trend reflects a ratio of content spending to revenue. In absolute values, Netflix is spending more on content than it used to — it’s just making more. In 2016, the company spent about $8.7 billion on content. This year, it said it expects to spend around $18 billion.

For the latest quarter, Netflix reported an operating margin of 28.2%, below its outlook of 31.5% and the 29.6% in the same period last year. It attributed the miss to "an expense related to an ongoing dispute with Brazilian tax authorities" and said it doesn't expect the matter to impact future results. On its ad tier, which analysts expect to eventually generate a higher average revenue per user (ARPU) than the pricier ad-free subscription, Netflix said it’s “using AI to test new ad formats.”

Looking ahead, the company said it expects revenue to grow 17% in the fourth quarter for $45.1 billion in full-year revenue, slightly better than Wall Street’s estimate of $45 billion.

Netflix’s fourth quarter slate has some notable entries, including, as mentioned, the series finale of “Stranger Things,” along with two Christmas day NFL games (the company paid $75 million per game for the slot last year).

Matt Phillips2h

DraftKings moves to counter prediction market threat

DraftKings rose after hours, following news that it is buying Railbird in an effort to address the competitive threat from prediction markets that has weighed on its share price — and that of FanDuel parent Flutter Entertainment — for weeks.

The deal is then latest example of the increasing linkages and overlap between worlds of financial markets, gambling, and prediction markets.

Earlier this month, ICE — the parent company of the New York Stock Exchange and the ICE futures markets, among others — announced it would invest up to $2 billion in prediction markets company Polymarket.

And Robinhood shares have recently gotten a lift from its ongoing partnership with prediction market platform Kalshi, which has seen growing uptake of its events contracts that allow buyers to take positions on football games.

(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions.)

By and large investor excitement over prediction markets — which has picked up since the start of football season — has seemed to come at the expense of Flutter and DraftKings, the two companies that dominate US sports betting.

Over the last three months through the end of regular trading on Wednesday, DraftKings and Flutter were down 23% and 18%, respectively, while the S&P 500 is up about 7%.

DraftKings acquires predictions platform Railbird

The deal is then latest example of the increasing linkages and overlap between worlds of financial markets, gambling, and prediction markets.

(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions.)

Over the last three months through the end of regular trading on Wednesday, DraftKings and Flutter were down 23% and 18%, respectively, while the S&P 500 is up about 7%.

Toby Bochan, Luke Kawa

US stocks go nowhere amid big rotation out of gold and into fake meat

The calmest session for the S&P 500 in over a month.

Jon Keegan

OpenAI releases Chrome-competitor browser “ChatGPT Atlas,” sending Google shares down

ChatGPT currently poses little threat to Google’s search business, but an OpenAI browser — and the data that comes with it — could change everything.

Luke Kawa9h

The no-fundamentals, high-volatility winning trades are reversing hard

The volatile, speculative momentum trades that have been on fire in recent months are getting smoked.

The SPDR Gold Shares ETF is on track for its biggest daily loss since April 2013, as of 10:28 a.m. ET.

And Goldman Sachs’ baskets of “high beta momentum longs” and “non-profitable tech” stocks, which have pretty much been the exact same line for two months, got dumped last Thursday and are down big again today.

D-Wave Quantum, Planet Labs, and Navitas Semiconductor are some of the stocks that feature in both of Goldman’s baskets and are down more than 2% as of 10:24 a.m. ET.

All of these groups have been handily outperforming the S&P 500 for an extended period of time despite by their very nature having more hype than actual track records — in terms of producing profits for shareholders — to speak of. Gold, obviously, generates no income. Nonprofitable tech stocks aren’t really in a position to spin off cash they don’t have to their owners. And, as mentioned, high-beta momentum and nonprofitable tech stocks have pretty much traded the same!

It’s difficult to pinpoint a fundamental catalyst for why speculative momentum trades suddenly turn on a dime, just as it’s often tricky to identify why they went on such a mammoth run in the first place. Perhaps the onset of earnings season — which gives us the opportunity to assess fundamental progress — means that right now, there’s more attention being paid to “line go up” when it comes to revenues and profits, and that’s taking away from the mindshare on “line go up” with respect to recent share price performance.

Matt Phillips9h

Gold slumps, GLD and miners take lumps

The record-breaking rise in gold stalled Tuesday, with prices tumbling.

The sudden downdraft hammered popular plays on the price such as the SPDR Gold Shares ETF, the largest gold ETF, which is poised for its biggest daily drop since April 2013 as of 11:52 a.m. ET.

Miners like Newmont Corp., Agnico Eagle, Wheaton Precious Metals, and Anglogold Ashanti are similarly getting whacked along with a host of speculative, high-beta momentum trades.

While there’s no clear reason for the slump, theories and contributing factors may include:

Social media chatter about gold — which coincided with a spike in options activity — cooling off considerably, according to data provided by SwaggyStocks. JPMorgan strategist Arun Jain notes that retail demand for commodity ETFs has reversed course: after routinely registering in the upper 90th percentiles much of last week, it’s in just the 2nd percentile relative to its one-year average as of 11:00 a.m. ET, with retail having pulled more than $50 million from these products.
Less safe haven demand now amid a seeming reduction in China-US tensions.
A seasonal drop in demand out of India — the world’s second-largest gold market after China — that typically follows Diwali.
Jitters about the fact that weekly CFTC positioning data on the futures market, one of the best sources of hard data on the gold market, continues to be unavailable as a result of the US government shutdown.

But even after today’s slump, gold prices, as measured by New York futures prices, are up about 60% in 2025.

Gold Slumps Most in Four Years as Record-Breaking Rally Cools