Netflix reports Q3 revenue up 12% YoY to $12.87B, in line with est., net income up 44% YoY to $3.66B, in part due to expenses timing; NFLX drops 5%+ after hours

Netflix's ad revenue guidance is reduced by 10%, impacting the projected annual growth for its advertising segment.

Netflix reported third-quarter earnings per share of 87 cents, exceeding the 82 cents estimated by analysts, and revenue of $12.87 billion, which was in line with expectations. The streaming giant's revenue saw a nearly 12% year-over-year increase, attributed to membership growth and recent price hikes. Net income rose significantly to $3.66 billion, partly due to the timing of expenses. For the fourth quarter, Netflix forecasts revenue to exceed 11% growth, reaching $13.44 billion. However, the company narrowed its full-year 2026 revenue forecast to $51.1 billion, which is at the lower end of previous projections and slightly below Wall Street's estimates. Shares dropped over 6% in after-hours trading following a lowered full-year revenue outlook for its advertising business, now projected at $2.7 billion, down from a previous $3 billion forecast. This adjustment stems from a slower-than-anticipated rollout of ad product capabilities.

Despite beating earnings expectations and meeting revenue targets, Netflix's stock dipped due to a lowered full-year revenue forecast for its advertising business. The company now anticipates around $2.7 billion in ad revenue for 2026, a reduction from its previous $3 billion projection. This downward revision is attributed to a slower-than-expected deployment of certain ad product capabilities, suggesting that the buildout of its advertising technology stack, while fast, is not entirely on track with aggressive targets.

This recalibration of ad revenue targets signals increased competitive pressure and a more challenging path to monetization for Netflix's ad-supported tier. Investors are keenly watching the company's strategy to address stagnating viewership and intensifying competition from platforms like YouTube, especially following recent organizational changes and layoffs. The success of its new Chief Content Officer and the ability to improve monetization while delivering perceived value to members will be critical for future growth.