Netflix Q3 Profit Beats Forecasts, but Weak Fourth-Quarter Guide Sends Shares Down

The quarter itself was fine — it was the next one Netflix described that sent the shares down.

Netflix, Inc. (Nasdaq: NFLX) said on Tuesday that revenue rose 11.8% year-over-year to $12.87 billion in the third quarter ended September 30, 2026, up from $11.51 billion a year earlier. Net income was $3.66 billion, up from $2.55 billion a year earlier, with diluted earnings per share of $0.87 against $0.59 a year earlier. Operating income was $4.46 billion and operating margin was 34.6%, up from 28.2% in the third quarter of 2025 and ahead of the company's forecast primarily due to the timing of expenses. The profit beat the Street: earnings per share of $0.87 came in ahead of the 82-cent average forecast of analysts surveyed by LSEG, according to Reuters, while revenue was in line with Wall Street forecasts. Investors sold the outlook instead: the shares, which had closed the regular session at $68.69, fell nearly 7% to $63.99 in after-hours trading, per Reuters.

The fourth-quarter guide is where the print turned

For the fourth quarter, Netflix forecast revenue of $13.44 billion, up 11.5% year-over-year, operating income of $3.5 billion and an operating margin of 26.0%, which includes roughly 120 basis points of negative impact associated with its recently announced headcount reductions and compares with 24.5% in the year-ago quarter. The profit guide is the miss: Netflix projected fourth-quarter net income of $2.79 billion and diluted earnings per share of $0.67, below the average analyst forecast of $3.07 billion and 73 cents reported by Reuters, and the $13.44 billion revenue guide sat below analyst estimates of $13.51 billion compiled by StockStory. Reuters noted that the third quarter's 11.8% revenue growth was the lowest rate of increase in nearly three years — the guide extends that deceleration into the holiday quarter.

Two full-year targets came down with the guide

The fourth-quarter math pulls the full year with it. Netflix now expects 2026 revenue of $51.1 billion, up 13% year-over-year — 0.2% below the midpoint of its prior forecast range — because subscription revenue growth has outperformed its expectations but advertising is tracking lower: the company now expects 2026 ad revenue of about $2.7 billion, against approximately $3 billion previously, due to a slightly slower than expected rollout of some ad product capabilities. It still expects a 2026 operating margin of 31.5%, including roughly 30 basis points of drag from the fourth-quarter headcount reductions, and it cut its 2026 free-cash-flow forecast to approximately $12.0 billion from a prior projection of $12.5 billion, due primarily to the expected closing of a real estate transaction in the fourth quarter.

The quarter itself still generated plenty of cash

None of that changes what the third quarter produced. Net cash provided by operating activities was $3.16 billion and free cash flow was $2.88 billion, up from $2.66 billion a year earlier. Netflix bought back 63.9 million shares for $4.8 billion in the quarter — its largest quarter ever of stock repurchases — and ended the quarter with $22.3 billion of capacity left under its remaining authorizations, gross debt of $15.3 billion and cash and cash equivalents of $8.2 billion. Growth was broad by region: revenue rose 11% in the United States and Canada to $5.63 billion, 11% in Europe, the Middle East and Africa to $4.11 billion, 17% in Latin America to $1.6 billion and 12% in Asia-Pacific to $1.54 billion.

A programming reset is running underneath the numbers

The headcount charge in the guide is not abstract. Reuters reported that last week Netflix laid off 1,000 people, or about 6% of its employees, replaced Chief Creative Officer Bela Bajaria and said film chief Dan Lin was departing — moves Reuters described as signs the company is resetting its programming strategy. The shareholder letter does not name the executives; it says the organizational changes enable Netflix to continue to aggressively invest in high-impact areas to improve its service. The letter also acknowledged investor concern about view-hours growth, while pointing to member response to its 2026 price changes — consistent with prior adjustments — as a sign engagement remains healthy. Separately, Reuters reported data from analytics firm Antenna showing monthly U.S. subscriber losses throughout 2026, a characterization a Netflix spokesperson told Reuters was not representative of the company's business performance.

The tests are now in the fourth quarter

What to watch is whether fourth-quarter revenue and margin land on the new guide without another trim, whether the ad product rollout catches up enough to rebuild the path beyond $2.7 billion, and whether the programming reset shows up in view hours before it shows up in costs. Netflix also closes the year with its biggest quarterly live slate to date, including NFL games on Thanksgiving Eve and Christmas Day — the kind of event programming it is counting on to re-accelerate engagement.