‘KPop Demon Hunters’ And AI Integration Headline Netflix’s Third Quarter

Netflix closed its third quarter of 2025 with solid growth, its biggest ever original – which happened to be animated, and an increasingly visible embrace of artificial intelligence that will only become more prominent moving forward.

Strong Quarter, One-Time Setback

According to the company’s shareholder letter, Netflix’s Q3 revenue rose 17% year over year to $11.5 billion, matching forecasts. Net income reached $2.5 billion, up 9% from last year. Operating margin came in at 28%, below guidance of 31.5%, due to a $619 million expense tied to a tax dispute in Brazil. The company says that without that one-time expense, it would have exceeded its margin forecast.

Engagement trends remained strong. The company achieved its highest-ever quarterly share of TV viewership in both the U.S. and U.K., growing 15% and 22%, respectively, since late 2022, according to Nielsen and Barb.

Animation At the Forefront

Animated content drove much of the streamer’s improved performance. KPop Demon Hunters is Netflix’s most popular film ever, with over 325 million views over its 91-day opening window. It has remained in the streamer’s Top 10 list since June, and has since expanded into a full franchise with global toy partnerships through Mattel and Hasbro, a hit soundtrack, and a presence in retail, fashion, and instant noodles. The film’s expansion beyond the screen is noteworthy as Netflix hasn’t had much success in that regard in the past, at least not with its animation titles. KPop Demon Hunters stands out as the platform’s first breakout animated feature IP and will surely be revisited again and again in the years to come.

AI Enters the Pipeline

A major theme this quarter was Netflix’s growing integration of generative AI into both its production and user experience. The streamer published new guidance for creators on the responsible use of AI in production and merged its in-house VFX units, Scanline and Eyeline.

In Happy Gilmore 2, the opening flashback used AI-assisted de-aging through Netflix’s in-house volumetric capture technology. The producers of Billionaires’ Bunker relied on AI tools for previsualization during pre-production to explore wardrobe and set design options.

On the consumer side, the company is testing a conversational search experience that allows members to use natural language to find content and is leveraging AI to localize marketing assets in multiple languages.

What’s Next

Netflix enters the final quarter of the year with a slate that reads like a theatrical calendar. Among major live-action releases, including the final season of Stranger Things and Guillermo del Toro’s Frankenstein, the company will also debut one of its most ambitious original animated features to date, Alex Woo’s In Your Dreams, a film that the streamer is pushing hard as a potential awards season contender.

The platform continues to expand its kids and family series programming, with a raft of new Dr. Seuss adaptations and the latest season of Gabby’s Dollhouse.

Looking Ahead

For Q4, Netflix projects another 17% revenue increase and an operating margin of 23.9%. The company expects full-year revenue of $45.1 billion, reflecting steady global growth across both subscriptions and advertising.

Netflix’s Q3 results show a company hitting its stride across content, technology, and monetization. Animation and AI now sit squarely at the center of that story.