Netflix shares fall after hours as it trims 2026 advertising forecast despite profit beat

Results beat on earnings, match on sales

Netflix said third-quarter revenue rose 12% to $12.87 billion from $11.51 billion a year earlier, in line with its own forecast, according to its shareholder letter and The Associated Press. Revenue grew 11% when currency effects are excluded. ^{[1] [2]}

Net income climbed 44% to $3.66 billion, or $0.87 per diluted share, against $0.59 a year earlier. AP, citing FactSet, put analyst consensus at $0.82 per share; Yahoo Finance's pre-report figure was $0.83. Operating income rose 37% to about $4.5 billion, a 34.6% margin, which Netflix said was ahead of its forecast mainly because of the timing of expenses. ^{[1] [2] [3]}

The company also bought back $4.8 billion of stock in the quarter, 63.9 million shares, which it described as its largest quarter of repurchases. Free cash flow was about $2.9 billion. ^[1]

Advertising outlook is lowered

Netflix now expects about $2.7 billion in advertising revenue for 2026, down from about $3 billion previously. The letter attributes the change to a "slightly slower than expected rollout of some ad product capabilities." ^{[1] [4]}

For the full year, Netflix guided to revenue of $51.1 billion, up 13%, which it said is 0.2% below the midpoint of its prior range. It projected a 31.5% operating margin and free cash flow of about $12.0 billion, down from $12.5 billion, mainly because of a real estate transaction it expects to close in the fourth quarter. ^{[1] [4]}

For the fourth quarter, Netflix forecast revenue of about $13.4 billion, up roughly 12%, and a 26.0% operating margin, compared with 24.5% a year earlier. That margin includes about 120 basis points of drag from the recently announced headcount reductions. ^[1]

Stock reaction

Netflix closed Tuesday down about 1.7% at roughly $68.69, per Yahoo Finance, before the results were released. AP reported shares fell $2.79, or 4.1%, to $65.90 in after-hours trading. Yahoo Finance earlier showed a decline of about 4.35% to $65.70. After-hours prices move quickly and these figures were taken at different times. ^{[2] [3]}

The stock is down about 25% so far this year and roughly 48% from its June 2025 record high, Yahoo Finance reported. ^[3]

Ross Benes, a senior analyst at Emarketer, told AP: "it's concerning that the company lowered its estimate for its ad business." Analysts and fund managers quoted by AP also pointed to slowing revenue growth and softer engagement. ^[2]

Layoffs and leadership changes

AP reported that Netflix said last week it would cut about 6% of its workforce, nearly 1,000 positions. The shareholder letter refers to the cuts and their margin effect but does not give a number of roles. AP also reported that Chief Content Officer Bela Bajaria is being replaced by Peter Rice, effective Oct. 26. ^{[1] [2]}

What comes next

Netflix said it will introduce its ad-supported tier in 15 more countries in 2027, starting in March. Its fourth-quarter slate includes an NFL game on Thanksgiving Eve, a Christmas Day doubleheader and the Tyson Fury and Anthony Joshua fight, according to the letter. ^[1]

The company said it expects to meet its 2026 guidance. How the shares trade when the regular session opens on Wednesday will show whether the after-hours drop holds. ^{[1] [2]}