Highlights
- Netflix shares plunge nearly seven per cent after earnings.
- Quarterly profit jumps despite disappointing fourth-quarter earnings guidance.
- Netflix lowers annual advertising revenue forecast amid delays.
Netflix Q3 Results 2026: Shares of streaming giant Netflix plunged nearly 7 per cent in after-hours trading on Tuesday, October 20, despite the company reporting a 44 per cent year-on-year increase in net profit for the third quarter ended September 30, 2026.
Netflix shares fell to around $63.99 at one point in extended trading, declining approximately 6.84 per cent from the regular-session closing price of $68.69.
The sharp decline came as investors reacted to weaker-than-expected fourth-quarter earnings guidance and a downward revision in the company’s advertising revenue forecast.
Netflix Q3 results 2026: Profit jumps 44%
According to Netflix’s shareholder letter released on October 20, the company’s net profit increased to $3.66 billion in the September quarter from $2.55 billion in the corresponding period last year.
Revenue rose 11.8 per cent year-on-year to $12.87 billion, compared with $11.51 billion a year earlier. Operating income increased 37 per cent to $4.46 billion.
The company’s operating margin expanded to 34.6 per cent from 28.2 per cent in the year-ago quarter, while diluted earnings per share increased 49 per cent to $0.87 from $0.59.
Why did Netflix shares fall nearly 7%?
According to Reuters, Netflix’s fourth-quarter earnings outlook fell short of Wall Street expectations, weighing on investor sentiment despite the company’s strong September-quarter performance.
Netflix projected fourth-quarter earnings per share of $0.67, compared with analysts’ expectations of approximately $0.73, Reuters reported.
In its shareholder letter, Netflix also lowered its full-year advertising revenue forecast to approximately $2.7 billion from around $3 billion previously, citing a slower-than-expected rollout of certain advertising product capabilities.
The company projected fourth-quarter revenue of $13.44 billion, net income of $2.79 billion and an operating margin of 26 per cent.
Netflix said its projected operating margin includes an approximately 120-basis-point negative impact associated with recently announced workforce reductions.
Netflix India business records strong growth
According to Netflix’s shareholder letter, viewing hours in India increased 24 per cent year-on-year during the September quarter, while viewing hours per member grew by low-to-mid single digits.
The company reported its largest-ever quarterly paid net additions in India, supported by its content slate and a transaction-based loyalty bundle with Flipkart.
Netflix said India revenue increased approximately 18 per cent year-on-year on a foreign-exchange-neutral basis.
The company highlighted the performance of Lock Upp, Musafir Cafe and Operation Safed Sagar during the quarter.
Netflix 2026 revenue outlook
Netflix said it expects full-year 2026 revenue of approximately $51.1 billion, representing 13 per cent year-on-year growth.
The company projected an operating margin of 31.5 per cent for 2026, compared with 29.5 per cent in 2025.
It also lowered its full-year free cash flow forecast to approximately $12 billion from $12.5 billion previously, primarily due to the expected closing of a real estate transaction in the fourth quarter.
According to the shareholder letter, Netflix repurchased 63.9 million shares worth $4.8 billion during the September quarter, marking its largest quarterly share buyback to date.
Netflix plans advertising expansion in 2027
Netflix said it plans to introduce its advertising-supported subscription tier in 15 additional countries in 2027, with the first phase of launches scheduled for March.
The company also acknowledged investor concerns over viewing-hours growth and said it would focus on improving engagement through original programming, third-party content licensing and improvements to its streaming platform.
Netflix expects annual operating income to grow more than 20 per cent in 2026.