Overview
Netflix
NFLX · NASDAQQ3 2026Communication Services · Streaming and Entertainment
Since the Report − 8.7%
Revenue grew 11.8% year over year, EPS beat the estimate by 6.1%; the stock fell 5.8% in its first reaction.
- RevenueQ3
- $12.87B
- Estimate $12.87B · in Line ✓
- Diluted EPSGAAP
- $0.87
- Estimate $0.82 · 6.1% Beat
Verdict
HOLDNetflix matched third-quarter expectations with revenue of $12.87 billion and beat by 6.1% with EPS of $0.87. The stock fell 6.0% after hours; fourth-quarter earnings guidance came in 8.2% below expectations and the full-year ad revenue target fell to $2.7 billion. Management said on the call that the strategy is unchanged; the thing to watch is whether revenue growth bottoms out around 11%.
Close on Report DayOct 20
$68.69▼ 5.8%Report-Day Move
- Market Cap(Today)
- ≈ $258 B
- 1Y Return(At Report)
- − 44%
- P/E(At Today's Price · $3.46 · Trailing 12M)
- 18.1
- Net Margin(Trailing 12M)
- 29.7%
Earnings Summary
In 30 Seconds- Netflix matched expectations with $12.87 billion in revenue and beat by 6.1% with EPS of $0.87.
- Fourth-quarter earnings guidance came in 8.2% below expectations, and the full-year ad revenue target fell to $2.7 billion.
- The stock fell 6.0% after hours on weak earnings guidance and slowing growth.
The Numbers
Operating Margin
34.6%
▲ 6.4 Points YoY · Guidance 33.2%
Free Cash Flow
$2.88B
▲ 8% YoY · Buybacks $4.8B
Q4 EPS Guidance
$0.67
Estimate $0.73 · 8.2% Below
Stock Reaction
▼ 5.8%
After Hours · 8:00 P.m. ET · $64.72
Quarterly Revenue ($ Billion)
11.51
Q3 25 · $11.5 B
12.05
Q4 25 · $12.1 B · QoQ + 4.7%
12.25
Q1 26 · $12.3 B · QoQ + 1.7%
12.56
Q2 26 · $12.6 B · QoQ + 2.5%
12.87
Q3 26 · $12.9 B · QoQ + 2.5% · YoY + 11.9%
13.44
Q4 26E · 13.44 · QoQ + 4.4% · YoY + 11.5%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
- Q4 26E
Q4 2026 Company Guidance
- Q4 Revenue13.44 billion
Market Expectation 13.51 · ▲ 11.5% YoYIn Line ✓
- Q4 EPS0.67 $
Market Expectation 0.738.2% Below Estimate ▼
- 2026 Revenue51.1 billion
Prior Range 51.0–51.4Revised Down 0.2% ▼
- 2026 Ad Revenue2.7 billion
Prior Expectation ~3.0Revised Down 10% ▼
- 2026 Free Cash Flow12 billion
Prior Target 12.5 · Real Estate DealRevised Down 4% ▼
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±10% around the midpoint.
Segment and KPI Data
Revenue by Segment
- US and Canada$5.63 BShare 43.7%▲ 11.0% YoY
- Europe, Middle East and Africa$4.11 BShare 31.9%▲ 11.0% YoY
9% excluding currency effects
- Latin America$1.60 BShare 12.5%▲ 17.0% YoY
12% excluding currency effects
- Asia-Pacific$1.54 BShare 11.9%▲ 12.0% YoY
15% excluding currency effects
Key Metrics
Operating Cash Flow
$3.16 B
Shareholder Letter
Share Buyback Amount
$4.80 B
Shareholder Letter
Shares Repurchased
63.9 M shares
Shareholder Letter
Gross Debt
$15.3 B
Shareholder Letter
Cash and Cash Equivalents
$8.20 B
Shareholder Letter
Shares are computed over the segment total: $12.9 B. Source: Shareholder Letter.
Metrics come only from the company's own filings; each one names the document it was taken from.
“Look, our business and our business flywheel are working. There is no need for a fundamental shift in the strategy. Our strategy is unchanged and it has always been and it continues to be, to combine best-in-class entertainment with industry-leading discovery, global distribution, and the best possible monetization.”
- Ads Behind Target
- Peter Rice As Content Chief
- 2027 Guidance in January
Summary and Review
Summary
Netflix reported third-quarter revenue of $12.87 billion. That is up 11.8% year over year and in line with market expectations. Diluted EPS was $0.87 versus an estimate of $0.82, a 6.1% beat. Net income rose 44% to $3.66 billion. Operating margin of 34.6% was 1.4 points above the company's 33.2% guidance. The company attributes the gap mainly to the timing of expenses. The revenue gate is in line, the earnings gate is open, and the guidance gate is closed.
The stock closed the regular session down 1.7% at $68.69. After the close it fell to $64.60 as of 5:43 p.m. ET, a 6.0% loss. The stock is down about 44% over the past year. The market read this report not as an earnings story but as a growth story. Fourth-quarter EPS guidance is $0.67, against an estimate of $0.73. The full-year ad revenue target was cut by 10%. The free cash flow target was also trimmed to $12.0 billion.
The score is 54 with a hold verdict; it rates the quarter, not the stock. The earnings gate is open, the revenue gate is in line, and the guidance gate is closed. The earnings call did not change that picture. Greg Peters said the ads business is growing more than 80% this year but is a bit behind its aggressive target. Spencer Neumann said 2027 guidance will come in January. Fourth-quarter margin carries a 1.2-point cost from layoffs of about 1,000 people.
Full Review
Revenue on target, growth slowing.
Revenue was $12.87 billion. The company's July guidance was $12.86 billion. Annual growth was 11.8%, or 11% excluding currency effects. Growth was 13.4% in the prior quarter and 17.2% a year earlier. It has slowed for four straight quarters. Growth came from memberships, price increases and advertising revenue. The fastest-growing region was Latin America at 17%. The US and Canada, and Europe, Middle East and Africa, each grew 11%. The company says churn improved both year over year and against its forecast. It no longer reports membership numbers quarterly. In India, revenue grew about 18% excluding currency effects. View hours in India rose 24%, and the company posted its biggest quarter of paid net additions there. The letter openly acknowledges investor concern about view hours growth.
Margin beat guidance, thanks to timing.
Operating income rose 37% to $4.46 billion. Operating margin was 34.6%. It was 28.2% a year ago and 33.4% in the prior quarter. That is 6.4 points of annual expansion and 1.2 points sequentially. Cost of revenues fell 1.4% year over year to $6.08 billion. Revenue, meanwhile, rose 11.8%. That gap was the main source of margin expansion. Technology and development expenses rose 21%, and sales and marketing rose 6.5%. The company attributes the margin beat mainly to the timing of expenses. So that gap may shift into the fourth quarter. Net income rose 44% to $3.66 billion. EPS rose 49% to $0.87. EPS grew faster than net income because of buybacks.
Guidance trails expectations on earnings.
Fourth-quarter revenue guidance is $13.44 billion, implying 11.5% annual growth. The market expected $13.51 billion, a 0.5% gap. EPS guidance of $0.67 is 8.2% below the estimate. Operating margin guidance is 26.0%. In the fourth quarter of last year the margin was 24.5%, so guidance implies 1.5 points of annual expansion. That figure includes about 1.2 points of cost from the recent layoffs. Full-year revenue guidance is $51.1 billion. The midpoint of the prior range was $51.2 billion, a 0.2% cut. The full-year operating margin target held at 31.5%. The real cut is in advertising: full-year ad revenue is now expected at about $2.7 billion, down from about $3 billion. The company blames a slower rollout of some ad products. On the call, Peters said the ads business is still growing more than 80% this year.
Cash is solid, and buybacks hit a record.
Operating cash flow was $3.16 billion, compared with $2.83 billion a year ago. Free cash flow rose 8% to $2.88 billion. The company bought back 63.9 million shares for $4.8 billion in the quarter. That was its largest quarterly buyback ever. Buybacks cut the diluted share count by about 3% over the year. Remaining buyback capacity is $22.3 billion. Readers new to the topic can see the buyback guide. Gross debt is $15.3 billion, and cash is $8.2 billion. The full-year free cash flow target was cut to $12.0 billion. The company ties this to a real estate transaction expected to close in the fourth quarter. So the cut comes from a one-time payment, not from operations. The company still targets a cash content spend to amortization ratio of about 1.1x.
Next quarter, watch revenue growth.
Earnings were strong this quarter, but the stock trades on the growth story. The stock has lost about 44% over the past year. The average analyst price target is $91.39, 33% above the closing price. Next quarter, watch one line: annual revenue growth. Company guidance is 11.5%. If growth rises above 12%, the slowdown has bottomed and the ad story can be rebuilt. If it drops below 11%, the slowdown is continuing. The company will give 2027 guidance with its January report. On the call, Spencer Neumann said the aim is to sustain double-digit revenue growth. The second gauge is the ad tier rollout. Ad revenue will be about 5% of total revenue in 2026. The ad tier launches in 12 new countries in March 2027. If that schedule slips, 2027 ad revenue expectations will come down too.
Looking Ahead
Strengths and Risks
5 Strengths · 5 RisksStrengths
5- EPS of $0.87 beat market expectations by 6.1%.
- Operating margin of 34.6% came in 1.4 points above the company's 33.2% guidance.
- The company made its largest quarterly buyback ever, at $4.8 billion.
- Churn improved both year over year and against the company's forecast.
- View hours in India rose 24% year over year, with record paid net additions.
Risks
5- Fourth-quarter EPS guidance of $0.67 came in 8.2% below expectations.
- Full-year ad revenue expectations were cut from $3 billion to $2.7 billion.
- Revenue growth has slowed for four quarters, to 11.8%.
- The margin beat came largely from the timing of expenses.
- Layoffs of about 1,000 people and Peter Rice's move into the chief content officer role carry execution risk.
What to Watch
6- November 25, 2026The NFL's first Thanksgiving Eve game streams on Netflix.
- December 25, 2026Two NFL games stream on Christmas Day.
- Q4 2026The Tyson Fury vs. Anthony Joshua boxing match streams live.
- Q4 2026A $1 billion debt maturity and the real estate transaction closing are expected.
- ~January 2027Fourth-quarter results and 2027 guidance.
- March 2027The ad tier launches in 12 new countries.
Upcoming Earnings
To Understand This