# Netflix (NFLX): Q3 profit up 44% to $3.66bn on 12% sales growth, but 2026 advertising forecast is cut to $2.7bn

> Netflix, the streaming service, reported third-quarter sales of $12.87bn, up 12%, and profit of $3.66bn, up 44%, as it kept far more of each sales…

- URL: https://centiview.com/post/netflix-nflx-q3-profit-up-44-to-3-66bn-on-12-sales-growth-but-2026-advertising-forecast-is-cut-to-2-7bn
- Published: 2026-10-24T08:30:00.000Z
- 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, the streaming service, reported third-quarter sales of $12.87bn, up 12%, and profit of $3.66bn, up 44%, as it kept far more of each sales dollar. At the same time it cut its forecast for 2026 advertising sales to about $2.7bn from about $3bn, and said its fourth-quarter profit margin will be much lower.

## What happened

Netflix published its results for the three months to 30 September 2026 on 20 October 2026, in a shareholder letter filed with the US Securities and Exchange Commission (SEC) on Form 8-K, the form used to report major events, followed by its quarterly report on Form 10-Q. Revenue, which is the money customers pay in subscriptions and advertising, was $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. Net income was $3,664m against $2,547m, or $0.87 a share against $0.59. These are reported (GAAP) figures in US dollars, and per-share numbers are adjusted for the ten-for-one share split of November 2025.

The company also changed its outlook. It lowered its 2026 forecast for advertising sales to about $2.7bn from roughly $3bn, which it blamed on a slightly slower rollout of some advertising product features, and the 24/7 Wall St. outlet reports that expanding the cheaper ad-supported plan to 15 more countries has moved to 2027. For the fourth quarter it forecast sales of about $13.4bn and an operating margin of 26.0%, which includes about 1.2 percentage points of cost from its recently announced job cuts. For the full year it forecast sales of $51.1bn, an operating margin of 31.5% and free cash flow of about $12bn, down from $12.5bn, partly because of a property sale it expects to close in the fourth quarter. Those are the company's own forecasts, not facts.

## The numbers, explained

Our working on sales: revenue rose by $1,364m (12,874 minus 11,510), or 11.8% (1,364 / 11,510), which the company rounds to 12%. By region, the United States and Canada grew 11.0% (5,628 / 5,072), Europe, the Middle East and Africa 11.0% (4,107 / 3,699), Latin America 16.9% (1,603 / 1,371) and Asia-Pacific 12.3% (1,537 / 1,369). Revenue was in line with the company's own forecast and with the $12.88bn analysts expected, according to 24/7 Wall St.; that analyst figure is an estimate and is reported by that outlet alone.

The jump in profit came from costs rather than sales. Cost of revenues, mostly the cost of making and licensing shows and films, was $6,079m against $6,164m, so it fell 1.4% while sales rose 11.8%. That left gross profit, sales minus those direct costs, of $6,795m, a margin of 52.8% (6,795 / 12,874) against 46.4% (5,346 / 11,510). Netflix therefore kept about 53 cents of each sales dollar after direct costs, up from 46 cents. Technology and development spending rose 21.0% to $1,033m, marketing 6.5% to $837m and general costs 1.8% to $466m. Subtracting all three from gross profit gives $4,459m, matching the reported operating income. The operating margin was 34.6% (4,459 / 12,874) against 28.2% (3,248 / 11,510). Netflix said it beat its own margin forecast mainly because of the timing of expenses, so some of this spending may land in later quarters.

Per-share profit rose faster than total profit partly because there are fewer shares. Average diluted shares fell 3.3%, from 4,340m to 4,195m (4,195 / 4,340 = 0.967), and Netflix spent a record $4.8bn buying back 63.9m shares in the quarter, an average of about $75 each by our arithmetic (4.8bn / 63.9m). Net income rose 43.9% (3,664 / 2,547), while the rounded per-share figure rose 47% ($0.87 against $0.59). Free cash flow, the cash left after running costs and equipment spending, was $2,884m (3,162 minus 279) against $2,660m (2,825 minus 165), up 8.4%. The 10-Q does not report this measure, so it is our calculation, and Netflix's letter gives $2.88bn.

## Why it matters

Netflix earns money from monthly subscriptions and, since it launched a cheaper plan with adverts, from advertisers. This quarter shows the subscription business working very well: sales grew in double digits in every region, and the company turned that into a bigger share of profit. The advertising cut matters because advertising is the newer, faster-growing part of the business. Even at the lowered figure of about $2.7bn, it is only around 5% of the $51.1bn full-year sales forecast (2.7 / 51.1 = 5.3%), so subscriptions still drive nearly all revenue.

For rivals and the wider industry, the figures show how much room there is in streaming for a company of scale, since Netflix spent $5.16bn on new content in the quarter, 10.9% more than a year earlier ($5,160m against $4,654m), yet its accounting cost of content, the amortisation that spreads that spending over time, rose only 5.8% ($4,235m against $4,003m). Netflix's shares fell about 5% after the results, according to 24/7 Wall St. and a report from Zhitong Finance carried by KuCoin, the same day as the lower fourth-quarter margin forecast and the advertising cut. We do not know why investors sold, and this is a description of what was reported, not a view on the shares.

## What to watch next

The fourth quarter ends on 31 December 2026, and Netflix's own forecast is for sales of about $13.4bn, operating income of about $3.5bn and a 26.0% margin, compared with 24.5% in the same quarter last year. The letter does not give a date for the next results, so none is stated here. Also dated in the letter: the property sale expected to close in the fourth quarter, which affects the free cash flow forecast, and the expansion of the ad plan to 15 more countries, which has been moved to 2027.

- Operating margin: operating profit as a share of sales
- Free cash flow: cash from operations minus spending on equipment and buildings
- Gross profit: sales minus the direct cost of making and delivering them
- Amortisation: spreading the cost of an asset, here films and shows, over the years it earns money

> **Why it matters** Netflix's sales rose 12% and its profit 44% in the quarter, mostly because costs grew far more slowly than sales, but its forecast for advertising sales was cut and its fourth-quarter margin is expected to drop.

> **What we verified** Revenue $12,874m, operating income $4,459m, net income $3,664m ($0.87 a share), regional sales, costs, cash flow and content spending: Netflix Form 10-Q and Form 8-K shareholder letter (SEC, primary), with revenue, margin, EPS, ad forecast, buyback and guidance also matching 24/7 Wall St., Inven Global and KuCoin. Percentages are our own calculations. The $12.88bn analyst estimate and the share-price move are from 24/7 Wall St. and KuCoin only.

### Sources
- [Netflix Q3 2026 shareholder letter, Form 8-K Exhibit 99.1 (SEC, primary)](https://www.sec.gov/Archives/edgar/data/0001065280/000106528026000290/ex991_q326.htm)
- [Netflix Form 10-Q for the quarter ended 30 September 2026 (SEC, primary)](https://www.sec.gov/Archives/edgar/data/0001065280/000106528026000291/nflx-20260930.htm)
- [Netflix Q3 2026: Profit surges 37% even as ad revenue outlook is cut (24/7 Wall St.)](https://247wallst.com/cards/netflix-q3-2026-earnings-nflx-01m5deq0f119rjb4fjrht5sjde)
- [Netflix posts $12.9bn Q3 revenue (Inven Global)](https://www.invenglobal.com/articles/27431/netflix-posts-129bn-q3-revenue-points-to-gta-vi-tie-up-with-take-two)
- [Netflix Q3 revenue grows 12% YoY, cuts full-year ad revenue forecast (KuCoin/Zhitong)](https://www.kucoin.com/news/flash/netflix-q3-revenue-grows-12-yoy-cuts-full-year-ad-revenue-forecast)