Netflix Beats Q3 Estimates but Warns of Slower Q4 Growth, Stock Slides

NFLX reported third-quarter 2026 revenue of $12.87 billion, up 12% from a year earlier and in line with estimates, and diluted EPS of $0.87 against a $0.82 consensus and $0.59 a year ago. Operating margin reached 34.6%, up from 28.2% in the year-ago quarter, on operating income of $4.5 billion, according to the company's shareholder letter, and Netflix said the earnings beat was primarily due to the timing of expenses. Free cash flow of $2.88 billion trailed the $3.22 billion estimate.

The outlook is what moved the stock. Netflix guided fourth-quarter revenue to $13.44 billion against $13.51 billion expected, EPS to $0.67 against $0.73, and operating margin to 26.0% against 27.6%. The letter says the Q4 margin carries about 120 basis points of costs tied to the recently announced cut of roughly 1,000 jobs. For the full year, Netflix narrowed revenue guidance to $51.1 billion from a $51 billion to $51.4 billion range, held its 31.5% operating margin target, and lowered expected free cash flow to about $12 billion from about $12.5 billion. It also cut its 2026 advertising revenue forecast to $2.7 billion from $3 billion, citing a slower-than-expected rollout of its ad products.

Shares slipped 1.7% in the regular session before the report and fell between 4% and 6% in after-hours trading as the numbers were digested. The stock was already down about 44% over the past year on worries about engagement growth and competition from YouTube and other free streamers. The print lands a week after Netflix laid off about 1,000 employees, its biggest round since 2022, and reshuffled content leadership: Bela Bajaria is leaving, former Disney TV chief Peter Rice takes over content, and film chief Dan Lin is out.

What to watch next: progress against the lowered $2.7 billion ad target, view-hour growth (the letter acknowledged "some investor concern about our view hours growth" ), and whether the expense timing that flattered Q3 reverses in Q4. Bulls point to valuation: one widely followed investor noted the stock now trades at about 19.2 times 2026 EPS, below the S&P 500 multiple.