Netflix Posts Earnings Beat but Shares Fall 6% on Ad Revenue Cut and Weak Q4 Guidance

Netflix reported third-quarter earnings that topped analyst estimates on Tuesday, but shares fell about 6% in extended trading after the company trimmed its full-year advertising revenue forecast and offered fourth-quarter revenue guidance that fell short of Wall Street expectations.

The streaming company posted earnings per share of 87 cents, beating the 82 cents analysts had projected, according to LSEG data. Revenue came in at $12.87 billion, up nearly 12% year over year, matching consensus estimates exactly.

Net income for the quarter reached $3.66 billion, or 87 cents per share, compared with $2.55 billion, or 59 cents a share, in the same period a year earlier. Netflix attributed the year-over-year profit increase in part to the timing of expenses.

Revenue growth was driven by membership expansion and a round of subscription price increases that took effect in March, the company said. Netflix added that the response to those price hikes has been consistent with prior changes and with its own expectations.

For the fourth quarter, the company projects revenue of $13.44 billion, an increase of more than 11% year over year, driven by membership growth, pricing, and advertising revenue. Netflix also narrowed its full-year 2026 revenue forecast to $51.1 billion — a 13% increase over the prior year — but that figure sits at the low end of the $51 billion to $51.4 billion range it provided during its previous earnings report and below the $51.2 billion Wall Street had expected, according to LSEG.

The most pointed disappointment for investors came on the advertising side. Netflix said it now expects 2026 ad revenue of approximately $2.7 billion, down from the roughly $3 billion it had previously forecast, citing a slower-than-expected rollout of certain ad product capabilities.

"Our ads business has delivered really impressive growth since we've launched, and we do see a long road of continued growth ahead of us," co-CEO Greg Peters said on the company's earnings call. "We set big growth targets for our ads business this year. We established an aggressive product road map that was consistent with that strategy. And, just note, I think that the build-out that we've been on is the fastest build-out of a comparable ad stack in our industry, but we are currently a bit behind our aggressive target for the year."

The results arrive amid a period of organizational turbulence at the company. Last week, Netflix said it was laying off approximately 6% of its workforce — roughly 1,000 employees — and that Chief Content Officer Bela Bajaria was departing. Former Disney executive Peter Rice has been named the new CCO, though the company has not yet detailed how he plans to address concerns around viewership trends.

Netflix said Tuesday that the fourth-quarter operating margin will face a negative impact of about 120 basis points stemming from those headcount reductions.

The company acknowledged unease among investors in its shareholder letter, writing, "We know there's some investor concern about our view hours growth," while adding that "engagement — which encompasses quantity, quality and variety of viewing — remains healthy and … we continue to deliver strong value to members."

Netflix outlined a three-part plan to accelerate viewing hours: delivering more entertainment value to members, using technology to improve the service, and improving monetization. Earlier on Tuesday, the company also announced new advertiser-facing features intended to help brands reach targeted audiences and measure ad impact more precisely.

The fourth-quarter report will be closely watched for signs of whether incoming content leadership under Rice can reverse the viewership headwinds that, combined with intensifying competition from platforms including YouTube, have weighed on investor sentiment heading into the final stretch of 2026.

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