Netflix posts net profit of $3.664 billion in the third quarter
Key Facts
Netflix said on October 20 that net profit reached $3.664 billion in the third quarter, compared with $2.547 billion in the same period of 2025, while diluted earnings per share rose to $0.87 from $0.59. The company reported revenue of $12.874176 billion, compared with $11.510307 billion a year earlier. In its shareholder letter, it said revenue grew 12% year over year and operating margin rose to 34.6% from 28.2%. It said operating margin exceeded its expectations mainly because of the timing of expenses. Still, the stock fell in after-hours trading after the results were announced, suggesting investors were also focused on growth prospects and future revenue sources.
Netflix shares fell $2.79, or 4.1%, to $65.90 in after-hours trading on October 20, according to The Associated Press. EL7’s daily closing data show the stock ended the October 19 session at $69.85, then closed at $68.69 on October 20. In the following session, it fell to a close of $65.04 on October 21, before rising to $67.05 on October 22. The stock ended the October 23 session at $65.85. These prices trace daily closes in the days after the results, while the 4.1% decline was the after-hours trading figure on October 20.
The cut to the advertising forecast was one of the main concerns associated with the market reaction. Netflix lowered its estimate for 2026 advertising revenue to about $2.7 billion, from about $3 billion previously. The company attributed the revision to a slight delay in rolling out some advertising product capabilities. By contrast, it said third-quarter revenue growth came mainly from subscriptions, driven by membership and price increases, as well as advertising revenue growth. It added that foreign exchange rates after hedging had a positive effect. This puts the expected performance of the advertising business alongside the subscription dependence of quarterly growth, as the company looks to expand its ad-supported tier geographically.
Engagement signals differed between investor concerns and the company’s assessment of its internal data. Before the results were announced, a Reuters report said investors were looking for details of Netflix’s plan to sustain growth as competition intensified and signs of engagement fatigue emerged. The report quoted co-CEO Ted Sarandos as saying the company was not growing as fast as he would like. But Netflix said members’ response to price changes in 2026 was in line with previous changes and its expectations. It described engagement, which includes the amount, quality and variety of viewing, as still healthy. It also said member retention remained healthy across all regions, and that the cancellation rate improved year over year globally and in the United States, coming in better than expected. These statements reveal a difference between investor concerns about the pace of growth and the retention and cancellation indicators presented by the company.
Netflix expects fourth-quarter revenue of $13.4 billion, up 12% year over year, and an operating margin of 26.0%. The margin forecast includes a negative impact of about 120 basis points from job cuts. The Associated Press reported in the week before its results report that the company had announced plans to cut about 6% of its workforce, or about 1,000 jobs, as part of organizational changes. For the full year, the company expects revenue of $51.1 billion in 2026, up 13%, and an operating margin of 31.5%. Netflix said it aims to accelerate growth in viewing hours, adding: "We are confident in our ability to do so."
The test of advertising growth extends to the announced expansion into new markets. Netflix said it will launch its ad-supported tier in 15 new countries during 2027, with the first wave starting in March 2027. The rollout includes nine countries in Europe, the Middle East and Africa, as well as Colombia, Peru and New Zealand. The expansion follows the cut to this year’s advertising revenue forecast to about $2.7 billion from about $3 billion previously. The company expects fourth-quarter revenue of $13.4 billion and year-over-year growth of 12%, according to the shareholder letter. That quarter’s results will be the first subsequent reading against these forecasts, as the company works to increase viewing hours and expand the presence of its ad-supported tier.