Netflix reported third-quarter 2026 revenue of $12.87 billion, in line with the $12.87 billion Wall Street expected, and earnings per share of 87 cents that topped the 82-cent estimate.

Net income reached $3.66 billion, up from $2.55 billion a year earlier, with revenue growing almost 12% year over year on membership gains and the March price increases. Operating margin expanded to 34.6% from 28.2%, and free cash flow hit $2.884 billion, per TradingKey.

The surprise that moved the stock was advertising. Netflix lowered its full-year 2026 ad revenue forecast to around $2.7 billion, down from roughly $3 billion previously, attributing the cut to a slower-than-expected rollout of some ad product capabilities.

On the earnings call, co-CEO Greg Peters conceded the company is 'currently a bit behind our aggressive target for the year,' while insisting the ads business has delivered impressive growth and still faces a long road of expansion.

The company also narrowed its 2026 full-year revenue forecast to $51.1 billion, the low end of its prior $51 billion to $51.4 billion range and below Wall Street's $51.2 billion consensus.

The forward outlook, not the quarter just printed, drove the sell-off. Netflix guided fourth-quarter revenue to $13.44 billion, up more than 11% year over year, but projected operating profit of $3.5 billion with margin contracting to 26% and EPS of just 67 cents, according to TradingKey.

Rising content spending and other Q4 costs weigh on the margin picture, and the roughly 1,000-employee layoff — about 6% of the workforce — plus restructuring costs will dent fourth-quarter operating margin by about 120 basis points, the company said.

Content chief Bela Bajaria and film head Dan Lin are departing, with former Disney executive Peter Rice taking the CCO role.

Investor concern centers on view-hours growth. In its shareholder letter, Netflix acknowledged 'some investor concern about our view hours growth' but argued that engagement — quantity, quality and variety of viewing — 'remains healthy.'

Management laid out a three-step fix: deliver more entertainment value, leverage technology across the service, and improve monetization. The Hollywood Reporter notes the streamer's summer revenue growth slowed to 11.8%, with Q4 guided to 11.5%.

Technically, TradingKey reports the stock trades in a bearish trend near oversold levels with an RSI of 37.2: holding $65 support could spark a rebound toward $73.07, while a breakdown opens a path toward $58.50.

Co-CEO Ted Sarandos said on the call that the company 'can do better' and will refocus on content quality and US engagement, per TradingKey.

New advertiser-facing features announced Tuesday aim to better connect brands to audiences and measure ad impact, a step toward rebuilding confidence in the ads roadmap.

For traders, the near-term decision point is whether NFLX closes above $65; the earnings-driven reset in ad expectations is the narrative to beat into the next report.