Netflix Cuts 2026 Advertising Revenue Forecast to $2.7 Billion
Key Facts
Netflix cut its 2026 advertising revenue forecast to about $2.7 billion, from about $3 billion in its previous estimate, citing a slight delay in rolling out some advertising product capabilities. The company announced the revision in its third-quarter shareholder letter, while saying subscription revenue growth exceeded its expectations. Third-quarter revenue was $12.874 billion, compared with $11.510 billion in the corresponding period of 2025, an annual increase of 11.8%. That places the lower advertising forecast against results showing continued growth in overall revenue, though at a lower annual rate than in the comparison periods cited in the company's letter. Netflix also expects full-year revenue to reach $51.1 billion.
The company said third-quarter revenue growth was led by subscriptions, with increases in memberships and prices and growth in advertising, while subscriber retention improved in every region. Operating income was $4.5 billion, up 37% year over year, while the operating margin reached 34.6%, compared with 28.2% in the third quarter of 2025. Netflix attributed its outperformance to the timing of expenses and a slight increase in revenue. Advertising revenue rose by $256 million during the quarter, according to the financial report filed with the U.S. Securities and Exchange Commission. In May, the company said its ad-supported plan reached more than 250 million monthly active viewers globally, and that more than 80% of members on that plan watch actively each week.
The lowered estimate raised concerns for an analyst at eMarketer, who noted that Netflix is under pressure to find alternative revenue sources to subscriptions and said the cut to its advertising business estimate "raises concerns." The company's shares fell 4.1% to $65.90 in after-hours trading following the results on October 20, according to the Associated Press. Shares were down about 25% year to date through Tuesday's close, the same report said. On October 29, the stock closed at $62.05, according to EL7 data. The share performance follows quarterly results that recorded growth in revenue and operating income, alongside a revision to the advertising business forecast.
Netflix expects fourth-quarter revenue of $13.4 billion, up 12% year over year or 11% on a foreign-exchange-neutral basis, according to its shareholder letter. That forecast is slightly below the average analyst estimate of $13.5 billion, according to the Associated Press. The company said growth in memberships, prices and advertising would support quarterly revenue. It also expects an operating margin of 26%, compared with 24.5% in the fourth quarter of 2025, with a negative impact of about 120 basis points tied to recently announced job cuts. Netflix aims to expand its ad-supported plan into 15 new countries during 2027, with the first phase beginning in March across nine countries in Europe, the Middle East and Africa, as well as Colombia, Peru and New Zealand.
Netflix announced in May that its ad-supported plan would expand into 15 new countries in 2027, with global advertising inventory added through podcasts and vertical video during the same year. The announced expansion gives the company additional markets in which to grow its advertising business, while the reduction in its 2026 revenue forecast remains tied, according to the shareholder letter, to a slight delay in rolling out some advertising product capabilities. The first phase of the new-market launch begins in March 2027 and includes nine countries in Europe, the Middle East and Africa, as well as Colombia, Peru and New Zealand. In the fourth quarter, the company will track delivery against its revenue and operating margin forecasts alongside growth in memberships, prices and advertising.