Equities

Netflix Hits Its Quarter, Then Cuts Its Ad Forecast for the Year

Third-quarter revenue of $12.87 billion matched estimates and profit beat, but Netflix lowered its 2026 ad revenue outlook to about $2.7 billion and its full-year sales forecast slipped.

By Marcus Rodriguez · Oct 21, 2026, 9:50 PM EDT

For information only, not investment advice. Prices delayed.

Tickers: NFLX

Netflix ($NFLX) delivered the quarter it promised and then trimmed the year. In its third-quarter letter to shareholders on Tuesday, the company said revenue grew 12% from a year earlier (11% excluding currency swings), in line with its own forecast. Revenue came to $12.87 billion, exactly the analyst average compiled by LSEG, CNBC reported. Earnings per share of 87 cents beat the 82-cent estimate.

Profit was the strong part. Operating income rose 37% to $4.5 billion, and operating margin climbed to 34.6% from 28.2% a year earlier. Netflix said both came in ahead of forecast mainly because of the timing of expenses. Diluted EPS of $0.87 was up 49% from $0.59.

The number most likely to get skipped is the ad forecast. Netflix now expects about $2.7 billion in 2026 ad revenue, down from roughly $3 billion, citing a "slightly slower than expected rollout of some ad product capabilities." It said subscription revenue has outperformed. On the earnings call, co-CEO Greg Peters said the ads business is "a bit behind our aggressive target for the year" but still growing more than 80% this year, according to a transcript published by The Motley Fool.

That ad shortfall nudged the full-year outlook. Netflix now sees 2026 revenue of $51.1 billion, up 13%, which it said is 0.2% below the midpoint of its prior range. CNBC noted that puts it at the low end of the earlier $51 billion to $51.4 billion range and below Wall Street's $51.2 billion expectation, per LSEG. For the fourth quarter, Netflix forecast revenue of $13.4 billion and an operating margin of 26.0%, which includes an approximately 120-basis-point hit from its recently announced headcount reductions. For the full year, it expects an operating margin of 31.5%, including an approximately 30-basis-point hit from those same reductions. It also cut its 2026 free cash flow forecast to about $12.0 billion from $12.5 billion, mainly because of a real estate deal it expects to close in the fourth quarter.

The company also took on a worry investors have raised directly. "We know there's some investor concern about our view hours growth," the letter said, adding that member response to this year's price increases matched expectations. On the call, CFO Spence Neumann was blunter: "To be clear, we want to grow view hours faster. We're not satisfied. We're working on it."

A few bright spots got less airtime. Churn improved from a year earlier globally and in the US and was better than forecast, Netflix said. In India, view hours grew 24% and revenue rose about 18% excluding currency, on the company's largest quarter ever of paid net additions there. And Netflix bought back $4.8 billion of its own stock in the quarter, its largest quarterly repurchase ever, with $22.3 billion of authorization left.

Netflix shares closed down 1.66% in Tuesday's regular session, as of Oct 20, 4:00 PM ET.

Tags: earnings · guidance · big-tech · buybacks-dividends