Netflix revenue rises 11.8%, but the company cuts its advertising forecast to $2.7 billion

Netflix ended the third quarter with higher revenue and profit but lowered the contribution it expects from advertising this year. The company reported revenue of $12.874 billion on Tuesday, up 11.8% from a year earlier, and put its 2026 advertising forecast at about $2.7 billion, compared with its previous estimate of approximately $3 billion.

The change does not mean advertising is generating less revenue than last year. It means ads will bring in less than Netflix had expected. The company attributes the revision to a slower rollout of some advertising tools. The distinction matters for a business seeking to combine subscription fees with a second source of revenue capable of sustaining growth.

Net income for July through September reached $3.664 billion, compared with $2.547 billion in the same period of 2025. Earnings per share were 87 cents, above the 82 cents the company itself had forecast in July. The results are improving, but the outlook for the end of the year shows that expansion faces obstacles.

Delays in the tools used to sell advertising

Greg Peters, one of Netflix’s two co-chief executives, told analysts that the rollout of some advertising products and their integration with partners had been delayed. He said demand remained strong and the range of advertisers was expanding. Those are management’s assessments, which subsequent results will need to substantiate.

The problem he described is operational. Bringing together viewers willing to subscribe to an ad-supported plan is not enough: the platform also needs to make it easy for advertisers to buy space, measure results and use the features it offers. Delays in those connections can constrain expected revenue even where there is commercial interest.

Peters also said combined subscription and advertising revenue per member on the ad-supported plan remained below that of the standard plan without ads, although the gap was narrowing. Adding subscribers to the advertising tier and increasing the revenue generated by each are therefore related but distinct tasks.

A stronger margin that should not simply be extrapolated

Netflix reported operating income of $4.459 billion and an operating margin of 34.6%, compared with 28.2% a year earlier. The company attributed the improvement over its forecast mainly to the timing of expenses. That explanation is a reason not to treat the entire difference as permanent savings or a structural increase in profitability.

For 2026 as a whole, it expects revenue of $51.1 billion and maintains its operating margin target of 31.5%. In July, it had forecast revenue of between $51 billion and $51.4 billion. The latest figure is within that range; the advertising downgrade does not mean the company is abandoning all its annual forecasts.

The fourth quarter also includes costs associated with recently announced job cuts. Netflix estimates they will reduce its quarterly operating margin by about 1.2 percentage points. It forecasts a margin of 26% for the period, still above the level in the final three months of 2025.

The distinction between the completed quarter and the one whose results are still to come is central to reading the figures. Revenue and profit for July through September have already been recorded. The October–December figures are estimates that depend on subscriber behavior, advertising and expenses.

The U.S. puts the content lineup under scrutiny

The debate follows changes in the content leadership team and the elimination of about 1,000 jobs, roughly 6% of the workforce, according to Reuters. Netflix appointed Peter Rice, a former Disney and Fox executive, to lead content and also oversee its film division while a new head of that business is selected.

Ted Sarandos told analysts there was no need for a fundamental change in strategy but acknowledged that execution in the United States needed to improve. His argument places the emphasis on the lineup’s ability to attract and retain viewers, rather than replacing the subscription and advertising model.

That need for improvement sits alongside encouraging signs management highlighted in other markets. In India, for example, the company reported a 24% increase in viewing hours during the quarter and approximately 18% revenue growth excluding currency effects. Those are different measures: more viewing time does not mean subscriber numbers have risen by the same percentage.

For the fourth quarter, Netflix forecasts revenue of $13.442 billion and earnings per share of 67 cents. Reuters noted that the latter fell short of the 73 cents analysts had expected.

The next results will need to answer two questions: how much of the advertising delay has been recovered, and whether investment in content is accelerating the U.S. business. The quarter shows that Netflix continues to earn more money; the revised outlook is a reminder that turning its audience into additional growth requires more than a larger catalog.