Netflix after results: margins are soaring, growth is slowing
$NFLX reported Q3 2026 results. The company is earning more than ever from every dollar, while revenue growth is gradually losing steam.
Revenue and earnings 📊
- Revenue of 12,9 bn USD (+12 % year over year), exactly in line with plan
- EPS of 0,87 USD (+49 %), net income of 3,7 bn USD (+44 %)
- Operating margin of 34,6 % vs. 28,2 % a year ago
Netflix no longer has to spend as much to acquire each new viewer, so more of every dollar in revenue goes straight to profit.
What surprised me 📉
- Revenue growth is slowing: 17 % → 13 % → 12 % over the last three quarters
- Full-year advertising revenue cut to 2,7 bn USD from 3,0 bn
- Free cash flow outlook cut to 12 bn USD from 12,5 bn
- Q4 operating margin of just 26 % due to severance costs and the timing of content spending
Advertising was supposed to be a new growth engine. The 300 mil. USD cut says it is getting up to speed more slowly than management promised.
Where the money is going 💸
In the quarter, it bought back 4,8 bn USD worth of its own shares, the most in its history. That brings the total to 10,8 bn since the start of the year, with another 22,3 bn available.
Regions 🌍
Latin America is growing the fastest (+17 %), with India leading the way in Asia. Watch EMEA: +11 % looks good, but excluding the impact of currencies, it is only +9 %.
Netflix is turning from a growth stock into a margin and buyback machine. That is not a bad thing, but it calls for a different valuation. Q4 is key: if the drop in margin to 26 % is really just a matter of timing, it will rebound in Q1 2027. If not, the market will start wondering whether the margin ceiling is closer than it thinks.