# Netflix (NFLX): profit up 44% to $3.66bn in Q3, but the 2026 advertising forecast is cut to about $2.7bn from $3bn

> Netflix reported third-quarter sales of $12.87bn, up 12% from a year ago, and profit of $3.66bn, up 44%. It kept its 2026 profit-margin forecast but…

- URL: https://centiview.com/post/netflix-nflx-profit-up-44-to-3-66bn-but-2026-advertising-forecast-cut-to-2-7bn-from-3bn
- Published: 2026-10-20T23:20:00.000Z
- Sectors: Technology & AI
- Region: US
- Ticker: NFLX
- Sentiment (opinion, not a recommendation): neutral
- Publisher: Centiview (Persie Ltd, London)
- General information only, not financial advice

Netflix reported third-quarter sales of $12.87bn, up 12% from a year ago, and profit of $3.66bn, up 44%. It kept its 2026 profit-margin forecast but lowered its expected advertising sales for the year to about $2.7bn from about $3bn, and trimmed its cash-flow forecast.

## What happened

On 20 October 2026 Netflix published its results for the three months to 30 September, in a letter to shareholders filed with the US Securities and Exchange Commission (SEC). Sales were $12,874m, against $11,510m a year earlier. Operating income, the profit from running the business before interest and tax, was $4,459m against $3,248m. Netflix said sales were in line with its July forecast and operating profit was ahead of it, mainly because of the timing of expenses rather than a permanent saving. Net profit was $3,664m, or $0.87 per diluted share against $0.59 a year ago.

The cautious part was in the outlook. Netflix now expects about $2.7bn of advertising sales in 2026, down from about $3bn in its July letter, which it blamed on a "slightly slower than expected rollout of some ad product capabilities". It also lowered its full-year free cash flow forecast, the cash left after paying for the business and its investment, to about $12.0bn from $12.5bn, mainly because of a property deal it expects to close in the fourth quarter. The letter also refers to recently announced job cuts, without giving a number. Outlets reported shares falling roughly 3% to 4% in after-hours trading, a preliminary move.

## The numbers, explained

Start with growth. Sales rose by $1,364m, or 11.85% ($1,364m divided by $11,510m), which Netflix rounds to 12%; excluding currency effects it was 11%. Operating income rose 37.3% ($1,211m on $3,248m). Operating margin, which is operating income divided by sales, was 34.6% ($4,459m divided by $12,874m) against 28.2% a year earlier, so Netflix kept about 35 cents of every $1 of sales as operating profit, up from about 28 cents. Netflix had forecast a 33.2% margin in July. Net profit rose 43.9% ($1,117m on $2,547m). Profit per share rose by more, +49% as reported ($0.87 against $0.59 is 47.5% on the rounded figures), partly because buybacks cut the average share count from about 4.34bn to 4.20bn.

Costs explain the margin. Cost of revenues, the direct cost of the service, fell 1.4% to $6,079m while sales grew, the main source of the improvement. Technology and development spending rose 21.0% to $1,033m, sales and marketing rose 6.5% to $837m and general and administrative costs rose 1.8% to $466m. After interest and other items, the pre-tax profit was about $4,317m, and tax of $653m was 15.1% of that, against about 18.1% a year ago, which also helped profit growth (our working from the filing). Figures are US dollars, GAAP (the standard accounting measure). Netflix's July forecast was $12,860m of sales, $4,268m of operating income and $0.82 per share; MarketBeat lists analyst expectations of $0.821 per share, an estimate, not a company figure.

Cash and capital returns tell a similar story. Free cash flow was $2,884m against $2,660m, up 8.4%, while operating cash flow was $3,162m. Netflix spent a record $4.8bn buying back 63.9m of its own shares, an average of about $75 a share (our working). Cash was $8.2bn against gross debt of about $15.3bn, roughly $1bn more than last quarter after a bond sale to fund a $1bn maturity in the fourth quarter. By region, sales grew 11% in the US and Canada ($5,628m), 11% in Europe, the Middle East and Africa ($4,107m), 17% in Latin America ($1,603m) and 12% in Asia-Pacific ($1,537m).

## Why it matters

Netflix makes most of its money from monthly subscriptions and also sells advertising on its cheaper plans. Advertising is small beside subscriptions: $2.7bn would be about 5% of the $51.1bn of sales Netflix expects for 2026 (our working). The cut, about 10% ($2.7bn against $3.0bn), therefore moves the full-year outlook very little: the $51.1bn sales forecast is 13% above 2025 and 0.2% below the midpoint of the July range, per Netflix. Advertising is the part of the business still being built, so its pace is worth following.

The fourth-quarter forecast shows how much of this year's profit gain was timing. Netflix expects sales of about $13.4bn, up about 11.5%, but an operating margin of 26.0%, against 24.5% a year earlier and well below this quarter's 34.6%. That includes roughly 1.2 percentage points of cost from the job cuts. The company says it has its biggest quarterly live slate to date, including an NFL game on Thanksgiving Eve and a Christmas Day doubleheader. For the full year it still expects a 31.5% operating margin against 29.5% in 2025, and operating income growth of over 20%. Those are company forecasts, not facts.

## What to watch next

Management said on the call it would next speak in January, when it is due to give its 2027 forecast; the exact date was not in the sources we read. Dated items in the letter include the NFL Thanksgiving Eve game, the Christmas Day NFL games and the Fury against Joshua fight, all in the fourth quarter, and the start of its ad plan in the first of 15 new countries in March 2027. The fourth-quarter figures will show whether the forecasts above of $13.4bn in sales, a 26.0% operating margin and $0.67 per share are met.

- Operating margin: operating income divided by sales
- Free cash flow: cash left after running costs and investment
- GAAP: the standard accounting measure, before any adjustments
- Share buyback: a company purchasing its own shares from investors

> **Why it matters** Netflix is a leading paid streaming service. Profit grew much faster than sales this quarter, but the company lowered its advertising forecast and its cash forecast for 2026, and expects a thinner profit margin in the fourth quarter.

> **What we verified** Sales $12,874m vs $11,510m, operating income $4,459m vs $3,248m, margin 34.6% vs 28.2%, net profit $3,664m vs $2,547m, EPS $0.87 vs $0.59, free cash flow $2,884m vs $2,660m, buyback, regional sales, 2026 and Q4 forecasts: Netflix Q3 2026 shareholder letter, Form 8-K (SEC). Netflix's July forecast ($12,860m, 33.2%, $0.82, ad revenue about $3bn, FCF $12.5bn): Q2 letter, Form 8-K (SEC). Headline figures and ad forecast cut: StockTitan and 24/7 Wall St.; the after-hours share fall of about 3-4% is as reported by them and is preliminary. EPS expectation of $0.821: MarketBeat. Job-cut numbers and sales consensus were reported inconsistently, so we leave them out. All percentages and the implied ratios are our own working.

### Sources
- [Netflix Q3 2026 shareholder letter, Form 8-K (SEC), 20 October 2026](https://www.sec.gov/Archives/edgar/data/0001065280/000106528026000290/ex991_q326.htm)
- [Netflix Q2 2026 shareholder letter, Form 8-K (SEC), July 2026](https://www.sec.gov/Archives/edgar/data/0001065280/000106528026000211/ex991_q226.htm)
- [Netflix Q3 2026 earnings results (StockTitan)](https://www.stocktitan.net/articles/netflix-q3-2026-earnings-results)
- [Live: Can Netflix smash Q3 earnings tonight after the bell? (24/7 Wall St.)](https://247wallst.com/investing/2026/10/20/live-can-netflix-smash-q3-earnings-tonight-after-the-bell/)
- [Netflix (NFLX) Q3 2026 earnings results (MarketBeat)](https://www.marketbeat.com/earnings/reports/2026-10-20-netflix-inc-stock/)