Netflix (NFLX) Q3 revenue rises 11.8% to $12.87 billion, but weak Q4 outlook hits shares

Netflix (NFLX) reported third-quarter revenue of $12.87 billion on 20 October, up 11.8% from a year earlier and in line with Wall Street forecasts. Its fourth-quarter profit outlook, however, fell short of analyst expectations, and the shares fell nearly 5% after hours.

The result matters for investors because the streaming leader's growth is decelerating while it faces what it called "intense competition". The guidance miss, rather than the quarter itself, drove the market's reaction.

What happened

Netflix posted third-quarter sales of $12.87 billion, up 12% year over year, boosted by growth in membership and an increase in subscription prices. According to the earnings call transcript, revenue grew 12%, or 11% on a foreign-exchange-neutral basis, driven by subscription increases and pricing.

The growth rate of 11.8% was the lowest in nearly three years, even though it matched forecasts. For the fourth quarter, the company forecast net income of $2.79 billion and earnings per share of 67 cents. The average analyst forecast was $3.07 billion and 73 cents.

Market data compiled on the latest report, published on 20 October, show earnings per share of 0.8 against an estimate of 0.79. They also show revenue of 12.56 billion in reporting currency against an estimate of 12.58 billion. The gap between that figure and the $12.87 billion cited elsewhere reflects different reporting conventions, which the sources do not explain.

The key figures of the report are:

• Third-quarter revenue: $12.87 billion, up 11.8% (12% year over year as reported by the company, 11% on a foreign-exchange-neutral basis).
• Fourth-quarter net income guidance: $2.79 billion, against $3.07 billion expected.
• Fourth-quarter EPS guidance: 67 cents, against 73 cents expected.
• Share move after hours on 20 October: down nearly 5%.

How did markets react?

Netflix shares fell nearly 5% in after-hours trading on 20 October after the results. The move came as several other companies reported the same evening, among them Intuitive Surgical, which fell 10% after earning $3 per share excluding certain items on revenue of $3.05 billion, and SpaceX, which gained 2% after reporting a 161% jump in third-quarter revenue to $14.58 billion.

Investors were reacting to a company that, in the words of one headline, vowed to revive viewership trends. According to Netflix's own statement, it acknowledged "some investor concern about our view hours growth". The company also cited intense competition.

The reaction came even though the quarter itself matched expectations: revenue was in line with Wall Street's forecasts, and the shortfall appeared only in the profit outlook for the final three months of the year.

On valuation, market data show a trailing price-to-earnings ratio of 21.21 and a forward ratio of 18.61. These were quoted without an as-of time, so they are not a measure of the post-report move.

What is behind the advertising forecast cut?

The brief for this report points to a 10% cut to Netflix's advertising forecast. The sources available here do not detail the size of that reduction or the company's reasoning, so it cannot be quantified beyond the headline claim.

The context is that advertising has been a growth driver for the group. In the third quarter of 2025, Netflix said it posted its best ad sales quarter ever. A slower ad outlook therefore weighs on one of the levers the market has watched in streaming and digital advertising.

The comparison with a year earlier is useful. In the third quarter of 2025, revenue rose 17%, in line with analyst expectations, while the stock fell after an earnings miss tied to a dispute with Brazilian tax authorities. The latest quarter shows a slower top line, at 11.8%, with no one-off tax item cited in the sources.

Why it matters

Netflix's report matters because it shows the largest streaming service leaning on price increases and membership growth while profit guidance falls short. Revenue growth of 11.8% is the slowest in nearly three years, and that comes after a 17% rise in the third quarter of 2025.

It also continues a pattern. In January 2026, the stock fell after a narrow fourth-quarter beat of 56 cents per share on $12.05 billion in revenue, against expectations of 55 cents and $11.97 billion, as concerns centred on slowing momentum in average viewing hours per member. Engagement is again at the centre of the debate.

For the United States market, where the company is based and where most of the streaming competition plays out, the reading is that a revenue match is not enough when forward profit is below consensus.

What are the risks and counterpoints?

The main risk named by the company is competition, along with viewership trends. Earlier results have also been affected by one-off items: in the third quarter of 2025, a dispute with Brazilian tax authorities weighed on operating income, which was $3.24 billion, about $400 million below the company's own forecast.

There are also positives in the record. In that earlier period Netflix generated $2.66 billion in free cash flow, beating estimates, and raised its yearly free cash flow forecast to about $9 billion. Whether the same strength holds in the latest quarter is not stated in the sources.

The size of the miss is also modest in per-share terms: guidance of 67 cents compares with 73 cents expected, a gap of 6 cents. Reported earnings per share of 0.8 were also marginally above the 0.79 estimate, so the quarter itself did not disappoint on profit.

Finally, the after-hours move is an early indication only. Trading on the next session may differ from the nearly 5% fall recorded on 20 October, and the sources give no later price.

What to watch next

The next steps for Netflix are the fourth-quarter results and the first reading of how the advertising business performs against the lowered outlook. The sources give no dates for them.

• Fourth-quarter net income against the company's $2.79 billion guidance.
• Fourth-quarter EPS against the 67 cents guided, and the 73 cents analysts had expected.
• Viewing hours per member, the metric investors have flagged since January 2026.
• Advertising revenue, after the reported 10% cut to the forecast.
• Trading in the shares after the nearly 5% after-hours fall on 20 October.

Netflix's next update would also show whether price increases can keep offsetting slower membership and engagement growth, the issue behind the latest reaction.