Netflix Revenue Jumps 12% In Q3; Execs Admit Engagement Needs Work

Editor's Note

TheDesk.net on State of Streaming is a syndicated partnership featuring reporting by Matthew Keys — founder and editor of TheDesk.net, covering the business of streaming, media technology, and digital distribution. This piece breaks down Netflix’s third-quarter financial results: top-line revenue climbing 11.8% to $12.87 billion, expanding operating margins, and resilient subscriber retention, contrasted against trimmed 2026 advertising revenue guidance and executive admissions that viewing-hour engagement requires immediate strategic focus.

Netflix reported higher third quarter (Q3) revenue and sharply higher profit on Tuesday as membership growth, price increases and a healthy advertising market helped drive income at the global streaming giant.

Revenue increased 11.8 percent to $12.87 billion during the quarter ended September 30, up from $11.51 billion a year earlier. Revenue increased 11 percent on a foreign-exchange-neutral basis.

Netflix said subscription revenue was the primary driver of growth, reflecting increases in memberships and pricing. Advertising revenue also increased, though the company did not disclose quarterly ad sales.

Operating income rose 37 percent to $4.46 billion from $3.25 billion. Operating margin expanded to 34.6 percent from 28.2 percent and finished ahead of Netflix’s forecast, primarily because of the timing of expenses and slightly stronger-than-expected revenue.

Net income increased 44 percent to $3.66 billion, compared with $2.55 billion a year earlier. Diluted earnings rose 49 percent to $0.87 per share from $0.59.

Netflix said retention remained healthy across every region, with churn improving from a year earlier both globally and in the United States. The company did not disclose a quarterly subscriber total, though it said its overall audience is approaching one billion people.

“We know there’s some investor concern about our view hours growth,” Netflix executives wrote in a letter to shareholders on Tuesday. “Member response to our 2026 price increases is consistent with prior price changes and our expectations, an indicator that our engagement — which encompasses quantity, quality and variety of viewing — remains healthy and that we continue to deliver strong value to members.”

Still, Netflix said there was more work to be done to increase growth in viewing hours, “and we’re confident we’ll do that by relentlessly focusing and executing against the aforementioned strategy.”

(Infographic by Matthew Keys for The Desk and State of Streaming)

Regional revenue increased across all four of Netflix’s geographic segments. Revenue grew 11 percent to $5.63 billion in the United States and Canada and 11 percent to $4.11 billion across Europe, the Middle East and Africa. Latin American revenue increased 17 percent to $1.60 billion, while Asia-Pacific revenue rose 12 percent to $1.54 billion.

The company said its advertising business continued to expand its technology and programmatic capabilities, but growth has been somewhat slower than expected. Netflix now expects about $2.7 billion in advertising revenue for 2026, down from its previous forecast of approximately $3 billion, citing a slower rollout of some advertising products.

Netflix plans to introduce its advertising tier in 15 additional countries during 2027, beginning with 12 new markets in March, the company said in its letter to shareholders.

For the fourth quarter, Netflix expects revenue of $13.44 billion, up about 12 percent, with a 26 percent operating margin. The forecast includes about 120 basis points of pressure associated with recently announced headcount reductions.