Netflix Profit Grows but Ad Forecast Cut Weighs on Shares
Netflix reported third-quarter operating profit of $4.46 billion, beating its July forecast and showing about 15% underlying growth after adjusting for a prior tax charge. The company lowered its 2026 advertising revenue outlook by $300 million and issued fourth-quarter earnings guidance below analyst expectations. Netflix also repurchased $4.8 billion of stock in the quarter.
Netflix's third-quarter revenue reached $12.874 billion, up 11.8%, while diluted EPS was $0.87 versus roughly $0.82 expected. Reported operating income rose 37% to $4.459 billion, but the prior-year quarter included a $619 million Brazil tax charge that distorts the comparison.
After adjusting for that charge, the underlying margin improved by roughly a percentage point, to 34.6% from 33.6%. The company also bought back $4.8 billion of shares, its biggest quarter, equal to about 1.7 times free cash flow of $2.88 billion.
The ad forecast reduction could matter beyond Netflix shareholders: advertisers and ad-tech partners may face a less predictable streaming inventory market, while viewers could see slower changes to ad-supported tiers. A lower share price may affect employee compensation and investor confidence, and the large buyback may signal that management is prioritizing shareholder returns over some growth spending. These effects are uncertain and likely modest relative to Netflix's overall scale.