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Netflix Q3 Earnings Beat Estimates, Ad Revenue View Trimmed
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Key Takeaways
Netflix's Q3 2026 EPS rose 49% to 87 cents, beating the consensus estimate by 6.1%.
Operating margin expanded to 34.6% from 28.2%, driven by expense timing and higher-than-expected revenues.
Netflix cut its 2026 ad revenue outlook to $2.7 billion and free cash flow forecast to $12 billion.
Netflix (NFLX - Free Report) delivered third-quarter 2026 revenues in line with its forecast and profitability ahead of it. However, it trimmed its 2026 revenue outlook and advertising revenue expectations. Management acknowledged investor concerns about the growth in view hours and said it aims to accelerate that growth. A The company reported third-quarter 2026 earnings per share of 87 cents, which increased 49% from 59 cents in the year-ago quarter. The figure beat the Zacks Consensus Estimate by 6.1%.
Quarterly revenues increased 11.8% year over year (11% on an F/X-neutral basis) to $12.87 billion, in line with the company’s forecast.
Subscription revenues were the main driver of revenue growth, reflecting higher memberships and pricing. Growth in advertising revenues and a favorable foreign-exchange impact, net of hedging, also contributed. Membership growth benefited from healthy retention in every region. Churn improved year over year, both globally and in the United States, and came in better than forecast. Netflix continues to withhold quarterly membership numbers.
Revenue growth was strongest in Latin America, which rose 17% year over year (12% F/X-neutral) to $1.60 billion. Asia-Pacific followed at $1.54 billion, up 12% (15% F/X-neutral). The United States and Canada grew 11% to $5.63 billion, and EMEA grew 11% (9% F/X-neutral) to $4.11 billion.
India was a standout. View hours there grew 24% year over year, helped by the reality series Lock Upp, which drove the most viewing of any title in India ever. Netflix’s first transaction-based loyalty bundle with Flipkart produced its largest quarter ever of paid net additions in India. Revenues in India grew about 18% on an F/X-neutral basis.
Member response to the 2026 price changes was consistent with prior adjustments and internal expectations. However, Netflix now expects 2026 advertising revenues of about $2.7 billion, down from the roughly $3 billion it projected earlier. It attributed the cut to a slightly slower-than-expected rollout of some ad product capabilities.
NFLX Profitability Benefits From Slower Content Amortization
Operating income rose 37.3% year over year to $4.46 billion. Operating margin expanded to 34.6% from 28.2% in the year-earlier quarter. That was ahead of the company’s 33.2% forecast, mainly because of the timing of expenses and slightly higher-than-expected revenues.
Content amortization grew 5.8% to $4.24 billion, consistent with the deceleration management had flagged for the second half. Cost of revenues declined 1.4% to $6.08 billion. Technology and development expenses rose 21% to $1.03 billion.
Net income for the quarter was $3.66 billion, up from $2.55 billion a year ago.
NFLX Cash Flow Improves Year Over Year
Net cash provided by operating activities was $3.16 billion in the quarter, up from $2.83 billion a year earlier. Free cash flow increased to $2.88 billion from $2.66 billion in the prior-year quarter.
Netflix lowered its 2026 free cash flow forecast to about $12 billion from $12.5 billion. The main reason is a real estate transaction it expects to close in the fourth quarter. The company still expects a cash content spend-to-amortization ratio of roughly 1.1x.
Netflix ended the quarter with $8.2 billion in cash and cash equivalents and $15.3 billion in gross debt. Non-GAAP net debt was $7.1 billion. Gross debt rose about $1 billion from the second quarter because Netflix completed a $1 billion bond deal to fund a $1 billion debt maturity due in the fourth quarter.
The company repurchased 63.9 million shares for $4.8 billion in the quarter, its largest quarterly buyback on record. It has $22.3 billion remaining under its authorizations.
NFLX Trims 2026 Revenue Outlook
Netflix now expects full-year 2026 revenues of $51.1 billion, implying 13% growth (12% F/X-neutral). That is 0.2% below the midpoint of its prior range of $51-$51.4 billion. Subscription revenue growth beat expectations, but the lower advertising forecast more than offset it.
The company maintained its 2026 operating margin target of 31.5% compared with 29.5% in 2025. The target now absorbs a negative impact of about 30 basis points from the fourth-quarter headcount reductions. The forecast implies operating income growth of more than 20% for 2026.
For the fourth quarter of 2026, Netflix expects revenues of $13.44 billion, up 11.5% year over year (11% F/X-neutral), driven by growth in memberships, pricing and advertising revenues. It projects an operating margin of 26% compared with 24.5% in the year-ago quarter, which includes a negative impact of about 120 basis points from the recently announced headcount reductions. Earnings per share are expected to be 67 cents, up from 56 cents in the fourth quarter of 2025.
Netflix plans its biggest quarterly live slate yet in the fourth quarter. It includes the NFL’s first Thanksgiving Eve game, a Christmas Day doubleheader and the Tyson Fury vs. Anthony Joshua fight.
Notable Q3 2026 Developments
Netflix announced headcount reductions, which it said will let it keep investing aggressively in high-impact areas. Management will give 2027 guidance in January.
The ad-supported tier will launch in 15 new countries in 2027. The first tranche, in March 2027, covers nine EMEA countries, Colombia, Peru and newly added New Zealand.
Netflix expanded its Netflix Ads Suite with globally available CTV marketplace deals for programmatic buying. It also signed new partnerships with MercadoLibre in Latin America and AdForm in EMEA.
The TF1 partnership in France, launched this summer, is generating incremental viewing. Netflix also signed a licensing deal with Disney that includes all five Ice Age films, and partnered with Take-Two on a sneak peek of Grand Theft Auto VI in August.
Zacks Rank & Stocks to Consider
Currently, Netflix carries a Zacks Rank #4 (Sell).
Fox is set to report its quarterly results on Nov. 2, while MARRIOTT VAC WW and Versant Media Group are slated to report their respective quarterly results on Nov. 3.
View the Zacks #1 Rank List
Image: Bigstock
Netflix Q3 Earnings Beat Estimates, Ad Revenue View Trimmed
Key Takeaways
Netflix (NFLX - Free Report) delivered third-quarter 2026 revenues in line with its forecast and profitability ahead of it. However, it trimmed its 2026 revenue outlook and advertising revenue expectations. Management acknowledged investor concerns about the growth in view hours and said it aims to accelerate that growth.
A
The company reported third-quarter 2026 earnings per share of 87 cents, which increased 49% from 59 cents in the year-ago quarter. The figure beat the Zacks Consensus Estimate by 6.1%.
Quarterly revenues increased 11.8% year over year (11% on an F/X-neutral basis) to $12.87 billion, in line with the company’s forecast.
Subscription revenues were the main driver of revenue growth, reflecting higher memberships and pricing. Growth in advertising revenues and a favorable foreign-exchange impact, net of hedging, also contributed. Membership growth benefited from healthy retention in every region. Churn improved year over year, both globally and in the United States, and came in better than forecast. Netflix continues to withhold quarterly membership numbers.
Revenue growth was strongest in Latin America, which rose 17% year over year (12% F/X-neutral) to $1.60 billion. Asia-Pacific followed at $1.54 billion, up 12% (15% F/X-neutral). The United States and Canada grew 11% to $5.63 billion, and EMEA grew 11% (9% F/X-neutral) to $4.11 billion.
India was a standout. View hours there grew 24% year over year, helped by the reality series Lock Upp, which drove the most viewing of any title in India ever. Netflix’s first transaction-based loyalty bundle with Flipkart produced its largest quarter ever of paid net additions in India. Revenues in India grew about 18% on an F/X-neutral basis.
Member response to the 2026 price changes was consistent with prior adjustments and internal expectations. However, Netflix now expects 2026 advertising revenues of about $2.7 billion, down from the roughly $3 billion it projected earlier. It attributed the cut to a slightly slower-than-expected rollout of some ad product capabilities.
Netflix, Inc. Price, Consensus and EPS Surprise
Netflix, Inc. price-consensus-eps-surprise-chart | Netflix, Inc. Quote
NFLX Profitability Benefits From Slower Content Amortization
Operating income rose 37.3% year over year to $4.46 billion. Operating margin expanded to 34.6% from 28.2% in the year-earlier quarter. That was ahead of the company’s 33.2% forecast, mainly because of the timing of expenses and slightly higher-than-expected revenues.
Content amortization grew 5.8% to $4.24 billion, consistent with the deceleration management had flagged for the second half. Cost of revenues declined 1.4% to $6.08 billion. Technology and development expenses rose 21% to $1.03 billion.
Net income for the quarter was $3.66 billion, up from $2.55 billion a year ago.
NFLX Cash Flow Improves Year Over Year
Net cash provided by operating activities was $3.16 billion in the quarter, up from $2.83 billion a year earlier. Free cash flow increased to $2.88 billion from $2.66 billion in the prior-year quarter.
Netflix lowered its 2026 free cash flow forecast to about $12 billion from $12.5 billion. The main reason is a real estate transaction it expects to close in the fourth quarter. The company still expects a cash content spend-to-amortization ratio of roughly 1.1x.
Netflix ended the quarter with $8.2 billion in cash and cash equivalents and $15.3 billion in gross debt. Non-GAAP net debt was $7.1 billion. Gross debt rose about $1 billion from the second quarter because Netflix completed a $1 billion bond deal to fund a $1 billion debt maturity due in the fourth quarter.
The company repurchased 63.9 million shares for $4.8 billion in the quarter, its largest quarterly buyback on record. It has $22.3 billion remaining under its authorizations.
NFLX Trims 2026 Revenue Outlook
Netflix now expects full-year 2026 revenues of $51.1 billion, implying 13% growth (12% F/X-neutral). That is 0.2% below the midpoint of its prior range of $51-$51.4 billion. Subscription revenue growth beat expectations, but the lower advertising forecast more than offset it.
The company maintained its 2026 operating margin target of 31.5% compared with 29.5% in 2025. The target now absorbs a negative impact of about 30 basis points from the fourth-quarter headcount reductions. The forecast implies operating income growth of more than 20% for 2026.
For the fourth quarter of 2026, Netflix expects revenues of $13.44 billion, up 11.5% year over year (11% F/X-neutral), driven by growth in memberships, pricing and advertising revenues. It projects an operating margin of 26% compared with 24.5% in the year-ago quarter, which includes a negative impact of about 120 basis points from the recently announced headcount reductions. Earnings per share are expected to be 67 cents, up from 56 cents in the fourth quarter of 2025.
Netflix plans its biggest quarterly live slate yet in the fourth quarter. It includes the NFL’s first Thanksgiving Eve game, a Christmas Day doubleheader and the Tyson Fury vs. Anthony Joshua fight.
Notable Q3 2026 Developments
Netflix announced headcount reductions, which it said will let it keep investing aggressively in high-impact areas. Management will give 2027 guidance in January.
The ad-supported tier will launch in 15 new countries in 2027. The first tranche, in March 2027, covers nine EMEA countries, Colombia, Peru and newly added New Zealand.
Netflix expanded its Netflix Ads Suite with globally available CTV marketplace deals for programmatic buying. It also signed new partnerships with MercadoLibre in Latin America and AdForm in EMEA.
The TF1 partnership in France, launched this summer, is generating incremental viewing. Netflix also signed a licensing deal with Disney that includes all five Ice Age films, and partnered with Take-Two on a sneak peek of Grand Theft Auto VI in August.
Zacks Rank & Stocks to Consider
Currently, Netflix carries a Zacks Rank #4 (Sell).
Fox (FOXA - Free Report) , MARRIOTT VAC WW (VAC - Free Report) and Versant Media Group, Inc. (VSNT - Free Report) are some better-ranked stocks that investors can consider in the broader Consumer Discretionary sector, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Fox is set to report its quarterly results on Nov. 2, while MARRIOTT VAC WW and Versant Media Group are slated to report their respective quarterly results on Nov. 3.