Netflix intends to spend extensively in AI throughout its platform and content creation pipeline. The streaming behemoth is now beta testing an AI search experience, localising promotional material for content, and experimenting with new ad formats. In a Q3 2025 shareholder letter, Netflix highlighted new AI capabilities and initiatives under development.
Netflix is reportedly adding AI into its recommendation engine, stating that it has always depended on technology to provide high-quality experiences. The corporation argues that its large data assets, as well as its products and business procedures, allow it to reap the benefits of artificial intelligence. In an earnings call, CEO David Sarandos stressed the use of AI throughout the content production pipeline, noting that AI will enable the firm and creative partners to deliver stories better, quicker, and in new ways. However, the corporation is not interested in originality for its own sake.
Netflix is incorporating AI into its content recommendation and discovery tools, beta testing a conversational search experience, and disseminating promotional materials in many languages. The business is also replacing computer-generated imagery (CGI) effects with AI outputs, such as de-ageing characters in Happy Gilmore 2, and exploring wardrobe and set designs. Furthermore, Netflix intends to leverage AI in its ad business to test and deploy new formats, with an emphasis on creating relevant ad creatives and placements for users. These new forms will be introduced during the following quarter.
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Netflix’s third-quarter revenue jumped 17% year on year, owing to membership growth, pricing changes and increasing ad revenue. Operating income reached $3.2 billion, up 12% year on year, with an operating margin of 28% against 30% in Q3’24. However, an expense of around $619 million for a continuing battle with Brazilian tax authorities lowered the margin by more than five percentage points. Diluted EPS was $5.87 vs. $5.40 last year, a 9% increase and $1.00 below the estimate due to lower-than-expected operating income. Revenue is the company’s key financial metric for growth, while operating margin is used for profitability.
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The firm predicts a 17% increase in revenue in Q4’25, led by increased membership, pricing, and ad revenue. The operating margin is expected to be 23.9%, up two percentage points from the previous year. The corporation predicts $45.1 billion in revenue in 2025 (16% increase, 17% on an F/X neutral basis). However, the business now expects a 29% operating profit in 2025, compared to previous estimates of a 30% reported margin.
