Netflix (NFLX): Q3 2026 Earnings Review

Netflix reported Q3 2026 results after the close on October 20. Diluted earnings came in at $0.87 a share, ahead of the $0.82 analysts expected. Revenue of $12.87 billion grew 11.8% year over year, in line with estimates but the slowest growth in nearly three years. Guidance was weaker: Q4 EPS of $0.67 and 2026 ad revenue of about $2.7 billion. The stock fell 5.31% the next session, closing at $65.04 on October 21.

Why Do We Think Netflix Will Underperform?

1. Revenue Growth Keeps Slowing

Revenue growth is decelerating, and the direction matters more than the level. Netflix grew revenue 11.8% in Q3, after 13.4% in Q2 and 16.2% in Q1, and guided Q4 to $13.44 billion, or 11.5%. Subscription revenue supplied $1,057 million of the $1,364 million year-over-year increase, so pricing and memberships still carry the business. Latin America led the regions, growing 17% to $1.60 billion.

2. The Advertising Bet Slipped

Advertising was supposed to be the second engine, and it slipped. Netflix now expects roughly $2.7 billion of 2026 ad revenue, down from about $3 billion previously, blaming a slower-than-expected rollout of some ad product capabilities. Quarterly ad revenue did grow $256 million year over year, so the business is working, just slower than planned.

3. The Outlook Is What Sold Off

The guidance is what moved the stock. For Q4, Netflix forecasts EPS of $0.67 and net income of $2.79 billion, below analyst averages of $0.73 and $3.07 billion. It guided Q4 operating margin to 26.0%, including about 120 basis points of drag from a cut that reduced 6% of employees. Full-year guidance is $51.1 billion of revenue, up 13%, at a 31.5% operating margin.

Historical Context

Netflix's revenue growth has now declined for three consecutive quarters. Revenue growth ran 17.2%, 17.6%, 16.2%, 13.4%, 11.8% across five quarters, with 11.5% guided for Q4. Operating margin reached 34.6% in Q3, though management said the margin beat came from expense timing. Free cash flow was $2.88 billion, and the 2026 forecast fell to about $12.0 billion from $12.5 billion. In the week through October 22, Netflix fell 4.9% while the S&P 500 ETF rose 0.1%.