Netflix third-quarter revenue rises 12% to $12.9 billion, margin climbs to 34.6%

Netflix, Inc. (NFLX) said Tuesday that revenue for the quarter ended Sept. 30 rose 12% to $12.9 billion, and that operating margin widened to 34.6% from 28.2% a year earlier. The results were disclosed in an 8-K filing that attached a shareholder letter.

Here's how the company did:

• Revenue: $12.87 billion vs. $11.51 billion a year earlier
• Diluted EPS: $0.87 vs. $0.59 a year earlier
• Net income: $3.66 billion vs. $2.55 billion a year earlier
• Operating income: $4.46 billion vs. $3.25 billion a year earlier

Revenue growth was 11% on a foreign exchange (F/X) neutral basis, a measure that strips out currency movements and the effect of hedging gains and losses. Subscription revenue drove the increase primarily, the company said, reflecting more memberships and higher pricing.

Advertising revenue also grew in the quarter, and a favorable F/X impact, net of hedging, added to reported revenue.

Diluted earnings per share rose 49% from a year earlier, the company said. Operating income reached $4.5 billion, up 37%.

The company said both operating income and margin were ahead of its forecast, due primarily to the timing of expenses and a slight upside in revenue.

Membership retention was healthy in every region. Churn, the rate at which members cancel, improved year over year globally and in the United States, and was better than forecast, the company said.

Here's how the company's regions did during the quarter:

• UCAN, the United States and Canada: revenue of $5.63 billion, up 11%
• EMEA, Europe, the Middle East and Africa: revenue of $4.11 billion, up 11%
• LATAM, Latin America: revenue of $1.60 billion, up 17%
• APAC, Asia-Pacific: revenue of $1.54 billion, up 12%

On an F/X neutral basis, EMEA grew 9%, LATAM 12% and APAC 15%. UCAN grew 11% on either basis.

In India, view hours grew 24% year over year, the company said, and revenue grew about 18% on an F/X neutral basis. It said it recorded its largest quarter ever of paid net additions in India, helped by its first transaction-based loyalty bundle with Flipkart.

For the fourth quarter, the company forecast revenue of $13.4 billion, up 12% from a year earlier, or 11% on an F/X neutral basis. Its operating margin forecast is 26.0%, compared with 24.5% in the year-ago quarter.

That fourth-quarter margin includes about 120 basis points of negative impact tied to recently announced headcount reductions, the company said. A basis point is one-hundredth of a percentage point. The letter does not say how many roles are affected.

For full-year 2026, the company expects revenue of $51.1 billion, growth of 13% or 12% on an F/X neutral basis. That is 0.2% below the midpoint of its prior 2026 revenue forecast range.

Advertising revenue for 2026 is now expected at about $2.7 billion, versus approximately $3 billion previously. The company attributed the change to a slightly slower than expected rollout of some ad product capabilities, while subscription revenue growth has outperformed its internal forecast.

Operating margin for 2026 is forecast at 31.5%, against 29.5% in 2025. The company said that figure includes about 30 basis points of negative impact from the fourth-quarter headcount reductions. Its forecast implies annual operating income growth of more than 20%.

Free cash flow was $2.9 billion in the third quarter, versus $2.7 billion a year earlier. Free cash flow is cash from operations less purchases of property and equipment. Net cash from operating activities was $3.2 billion, compared with $2.8 billion.

The company cut its 2026 free cash flow forecast to about $12.0 billion from $12.5 billion, due primarily to an expected real estate transaction closing in the fourth quarter.

In the quarter, the company bought back 63.9 million shares for $4.8 billion, its largest quarter ever for stock repurchases. It has $22.3 billion of capacity left in its remaining authorizations.

Gross debt ended the quarter at $15.3 billion, about $1 billion higher than at the end of the second quarter. That reflects a $1 billion bond deal completed in the quarter to fund a $1 billion debt maturity due in the fourth quarter. Cash and cash equivalents were $8.2 billion.

The company also cited a partnership with TF1 in France, a licensing deal with Disney, and ad-tech deals with MercadoLibre in LATAM and AdForm in EMEA. It said its advertising tier will launch in 15 new countries in 2027, starting in March.

Co-CEOs Greg Peters and Ted Sarandos, CFO Spence Neumann and VP of Finance and Capital Markets Spencer Wang were scheduled to answer questions submitted by sell-side analysts in a video interview at 1:45 p.m. PT on Oct. 20.