Netflix forecasts weaker Q4 profit and cuts 2026 ad revenue target to $2.7bn

Profit guidance falls short

Netflix reported third-quarter results on Tuesday, 20 October, and guided to fourth-quarter earnings of 67 cents per share, below the 73 cents analysts had expected. Its projected net income of $2.79bn also came in under the $3.07bn estimate. For the quarter, revenue climbed 11.8% to $12.87bn, matching forecasts but marking the slowest growth in almost three years. Earnings of 87 cents per share beat the 82-cent average estimate compiled by LSEG. The company spent $4.8bn repurchasing its own shares in the quarter, its largest quarterly outlay of that kind. Shares dropped nearly 6% to $64.66 after hours, leaving them more than 40% lower over the previous year.

Advertising target trimmed

Netflix now expects roughly $2.7bn of advertising revenue this year, down from about $3bn, because some ad features launched more slowly than planned. Full-year revenue should reach $51.1bn, which sits at the bottom of the range the company set in July. Greg Peters, the other co-CEO, said the ad business was somewhat behind a target the company had described as aggressive. The fourth-quarter revenue forecast of $13.44bn would represent growth above 11%, driven by subscriptions, pricing and advertising.

Leadership overhaul and layoffs

Earlier in October 2026, Netflix cut about 1,000 jobs, roughly 6% of its workforce, and replaced content chief Bela Bajaria with Peter Rice, a former Disney and Fox executive who will temporarily lead the film division. Film chief Dan Lin also left the company. The fourth-quarter operating margin forecast of 26% includes a hit of about 1.2 percentage points from the job cuts. On the post-earnings video call, Sarandos framed the management changes as a step toward producing quality TV shows and movies. He said the strategy did not need to change, but execution in the United States did need to improve.

Now we've seen an opportunity to take our slate to the next level.

Viewing and the US picture

Netflix did not publish global viewing hours for the third quarter, but said viewing in India rose 24% from a year earlier. In July it reported that members watched 97bn hours in the first half of 2026, a 2% increase on the first half of 2025. The company stopped disclosing its total subscriber count in the first half of 2025, though The Irish Times puts its base at more than 325 million. Data from analytics firm Antenna, cited in coverage, indicates US subscribers fell in every month through September 2026, excluding wholesale bundles, and a Netflix spokesperson said the figures do not reflect the business. PP Foresight analyst Paolo Pescatore said the company was focused on too many unwanted distractions.

The company needs to get back to basics and focus on compelling content.

Outlook and expansion

The final quarter is packed with three NFL games and the last season of Emily in Paris. Netflix plans to extend its cheaper ad-supported plan to 15 more countries in 2027, starting in March with nine markets in Europe, the Middle East and Africa, plus Colombia, Peru and New Zealand. The company said it will keep expanding its library by licensing additional third-party content. Analysts remain doubtful about how quickly growth can return, and the shares had already lost more than 40% over the year before the report.