Netflix reported earnings for the third quarter on Tuesday that exceeded analysts' expectations, with revenue meeting forecasts. Wall Street is now focusing on the company's engagement and advertising metrics.
The following is Netflix's performance as of September 30th, compared with the predictions of analysts from the LSEG survey:
- Earnings per share: 87 cents, expected to be 82 cents.
- Revenues: $1.287 billion, expected to be $1.287 billion as well.
The company stated that its revenue increased by nearly 12% year-on-year, driven by membership growth and the increase in subscription prices that took effect in March. Netflix said that the response to these price increases was consistent with past changes and its expectations.
The net profit for this quarter was $3.66 billion, equivalent to 87 cents per share, compared to $2.55 billion last year, which was 59 cents per share. Netflix stated that the year-over-year increase in profits is partly attributed to the timing of expense recognition.
The company stated that it expects revenue in the fourth quarter to grow by more than 11%, reaching $13.44 billion, driven by increases in membership, pricing, and advertising revenue.
The company has narrowed its forecast for the entire year of 2026, stating that it now expects revenue to reach $51.1 billion, a 13% increase from the previous year. This figure is at the lower end of the range of $51.0 billion to $51.4 billion provided in Netflix's last financial report, and also lower than the Wall Street forecast of $51.2 billion for the whole year as indicated by LSEG.
Netflix's stock price fell by about 4% after the market closed on Tuesday.
Following recent organizational restructuring and unfavorable factors—including a stagnation in viewership and increasingly fierce competition from platforms such as YouTube—Wall Street and investors will expect Netflix to provide more details regarding the company's strategy.
"In the fierce competition and explosion of content competing for consumers' attention, strategic clarity and excellent execution are of paramount importance," the company stated in a letter to shareholders on Tuesday. "In the third quarter, we performed exceptionally well in all three of our priorities, but we believe there is room for improvement through focus and continuous refinement."
Last week, Netflix announced that it would lay off about 6% of its staff, which is approximately 1,000 employees, and its Chief Content Officer, Bela Bagaria, will step down from this position.
The company stated on Tuesday that it expects the fourth-quarter performance to be affected by these layoffs, which will have a negative impact of about 120 basis points on the operating margin.
Former Disney executive Peter Rice has been appointed as the new Chief Content Officer, but it is still unclear how he will address concerns regarding viewership numbers.
Netflix stated in a letter to shareholders, "We are aware that some investors have concerns about the increase in viewing duration," but added, "Interactivity—including the volume, quality, and diversity of views—is still healthy, and... we continue to bring strong value to our members."
The company seeks to accelerate the growth of viewing duration and indicates that it plans to achieve this through a three-step strategy: providing members with more entertainment value; utilizing technology to improve all aspects of the service; and enhancing monetization capabilities.
The core of Netflix's value proposition has always been its cheaper ad-supported packages. However, on Tuesday, the company lowered its annual revenue forecast for its advertising business.
Netflix stated that it currently expects advertising revenue in 2026 to be around $2.7 billion, which is lower than the previously predicted $3 billion. The company mentioned that the revision of the forecast is due to the launch of some advertising products being slower than anticipated.
Earlier on Tuesday, Netflix announced the launch of a new feature for advertisers, claiming that it will help brands better connect with the right audience and measure the effectiveness of their ads.
