Netflix Beats Q3 EPS But Issues Weak Q4 Outlook as Revenue Growth Hits Multi-Year Low

Netflix reported third-quarter 2026 earnings per share of $0.87, topping the $0.82 consensus estimate by five cents, while revenue of $12.87 billion came in exactly in line with expectations, rising 12% year over year. Operating income reached $4.46 billion, beating estimates of $4.26 billion, and operating margin expanded 640 basis points to 34.6%. Free cash flow of $2.88 billion missed the $3.22 billion estimate, and the 12% revenue gain marked the company's slowest quarterly growth in years and the fourth consecutive quarter of decelerating sales.

The forward guidance overshadowed the headline beat. Netflix projected fourth-quarter revenue of $13.44 billion, below the $13.51 billion Wall Street expected, with Q4 EPS of $0.67 against a $0.73 estimate and an operating margin of 26%, well under the 27.6% consensus. The company said roughly 120 basis points of the Q4 margin compression reflects costs from recent headcount reductions. For full-year 2026, Netflix narrowed its revenue guidance to $51.1 billion from a prior range of $51 billion to $51.4 billion, trimmed its free cash flow target to approximately $12 billion from $12.5 billion, and cut its advertising revenue forecast to roughly $2.7 billion from an earlier approximation of $3 billion.

The results arrive against a punishing backdrop: Netflix shares have fallen roughly 26% year to date, erasing more than $135 billion in market value, and were trading near a 52-week low ahead of the print. Analyst sentiment had turned cautious, with BMO cutting its price target on engagement concerns and MoffettNathanson's Robert Fishman saying investor sentiment had clearly turned against the company. U.S. television viewing share slipped from 8.8% to 7.8%, and analysts pointed to stagnant engagement in the U.S. and Canada as a central worry, with users drifting toward TikTok and YouTube.

Netflix announced it will cut approximately 6% of its workforce, or roughly 1,000 roles, its largest round of layoffs since 2022, with management saying the organizational changes free up investment in high-impact areas. The company also said it will expand its advertising tier to 15 new countries in 2027. Netflix repurchased $4.8 billion in shares during the quarter and has $22.3 billion remaining under its buyback authorization. Options markets had priced in a roughly 9% to 10% post-earnings move, and the options chain was flooded with deep put activity ahead of the report.