Netflix Profit Jumps 44% in Third Quarter, But Shares Slide on Ad Revenue Cut

Netflix reported sharply higher third-quarter profit this week even as it trimmed its outlook for advertising revenue, a combination that sent shares down nearly 6% in after-hours trading despite results that beat Wall Street's earnings estimate.

In a shareholder letter filed with the Securities and Exchange Commission, Netflix said revenue for the quarter ended September 30 rose 12% from a year earlier to $12.87 billion. Net income jumped to $3.66 billion from $2.55 billion in the same period last year, pushing diluted earnings per share to $0.87, up from $0.59 and ahead of the $0.82 analysts had expected, according to figures reported by Kaohoon International. Operating income rose 37% to $4.46 billion, lifting Netflix's operating margin to 34.6% from 28.2% a year earlier.

Retention holds, but ad business slows

Netflix said churn improved year over year both globally and in the United States, describing "continued, healthy retention in every region" as a key driver of the quarter, though it did not disclose a total subscriber count in the letter. The softer note in the results concerned advertising. Netflix said it now expects roughly $2.7 billion in ad revenue for all of 2026, down from the approximately $3 billion it had previously projected, attributing the cut to "a slightly slower rollout of some ad product capabilities." The company said its ad-supported tier will expand into 15 additional countries in 2027, with the first group of new markets launching in March. Revenue growth itself also decelerated slightly, a trend flagged in a report from Bernama that attributed part of the slowdown to tougher year-over-year comparisons as Netflix's password-sharing crackdown and ad-tier launch move further into the past.

For the fourth quarter, Netflix guided to revenue of about $13.44 billion, also up 12% year over year, but forecast a lower operating margin of 26%, down from 24.5% a year earlier. The company said roughly 1.2 percentage points of that margin pressure stems from recently announced staff reductions, though it did not specify how many positions were affected. Netflix forecast fourth-quarter net income of $2.79 billion and diluted earnings per share of $0.67. Investors and analysts will be watching the pace of the international ad-tier rollout into next year as a signal of whether Netflix can keep growing its advertising business fast enough to offset slowing subscriber-revenue growth in its more mature markets.