Netflix earnings topped Wall Street’s profit forecast Tuesday, less than a week after the streamer cut about 1,000 jobs. But Netflix also lowered its advertising outlook for the year, and its shares fell in after-hours trading.
Third-quarter revenue rose about 12% to $12.87 billion, in line with analyst estimates, while earnings of 87 cents per share beat the 82 cents analysts expected, Variety reported. Operating margin climbed to 34.6% from 28.2% a year earlier. Still, revenue growth was the slowest in three years.
The details: revenue, margin and guidance
The biggest change came in advertising. Netflix now expects about $2.7 billion in ad revenue this year, down from roughly $3 billion, because some of its ad product features are rolling out slower than planned, the company said in its shareholder letter. Subscription revenue, it said, is running ahead of expectations.
For the fourth quarter, Netflix forecast revenue of $13.4 billion and an operating margin of 26%. Costs from the layoffs will shave about 1.2 percentage points off that margin.
For the full year, Netflix now expects revenue of $51.1 billion, up 13% and just below the middle of the $51 billion to $51.4 billion range it gave in July. It kept its 31.5% operating margin target. Netflix also trimmed its free cash flow forecast to about $12 billion from $12.5 billion, pointing to a real estate deal expected to close this quarter, and said it bought back a record $4.8 billion of its own stock in the third quarter.
The stock closed at $68.69 Tuesday before the report, down more than 25% this year.
The layoffs and a new content chief
Co-CEOs Ted Sarandos and Greg Peters told employees in an Oct. 14 memo that the company would let go of about 6% of its staff, with product, technology, legal and human resources teams hit hardest. Netflix had about 16,000 full-time employees at the end of 2025.
“Our business is strong and growing, and we remain on track to deliver our full-year forecast,” the co-CEOs wrote.
At roughly 1,000 jobs, it’s the largest layoff in Netflix history. In 2022, after the company reported its first subscriber loss in more than a decade, Netflix cut about 450 jobs over several rounds.
The content team is changing at the top, too. Peter Rice, the former chairman of Walt Disney Television, takes over as chief content officer Oct. 26. He replaces Bela Bajaria, who is leaving after nearly 10 years at Netflix.
Why investors are worried about engagement
Netflix said members watched 2% more hours in the first half of 2026 than a year earlier. That’s growth, but slower than Wall Street wants. Revenue growth in the U.S. and Canada, Netflix’s biggest region, slowed to 10% in the second quarter and 11% in the third.
Sarandos acknowledged the pressure at Bloomberg’s Screentime conference Sept. 30. “Overall, we’re not growing as fast as I want us to, and we’re working on making that move faster,” he said.
Netflix addressed the concern directly in Tuesday’s letter, saying it wants to speed up view-hours growth. It also pointed to improving churn in the U.S. and globally, and said members reacted to this year’s price increases as expected.
What it means for fans and subscribers
Netflix didn’t announce any new price changes Tuesday. Its ad-supported plan is headed to 15 more countries in 2027, starting in March with nine countries in Europe, the Middle East and Africa, plus Colombia, Peru and New Zealand.
The streamer is also leaning on big events to close out the year. The fourth-quarter lineup includes the NFL’s first Thanksgiving Eve game, with U2 performing at halftime, a Christmas Day NFL doubleheader and the Tyson Fury vs. Anthony Joshua fight. On the scripted side, there’s David Fincher’s “The Further Mis-Adventures of Cliff Booth,” starring Brad Pitt, and the final season of “Emily in Paris.”
Netflix is also adding more outside programming, including a new licensing deal with Disney that brought all five “Ice Age” films to the service.
Context: competition and a lost deal
Netflix is competing for viewers’ time not only with traditional studios but with YouTube and TikTok, whose free, creator-made videos cost far less to produce. Earlier this year, Netflix also lost the bidding for Warner Bros. to Paramount Skydance, though it collected a $2.8 billion breakup fee that boosted its first-quarter results.
How fast Rice can sharpen the slate, and how quickly Netflix’s ad tools catch up, will shape the next few quarters. For more streaming news, visit Total Apex Entertainment’s TV and streaming section.
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