Netflix forecast a 26% operating margin for the fourth quarter, higher than a year earlier even after factoring in job cuts, as delays to its advertising rollout led it to lower its 2026 ad outlook.
Netflix said in its Oct. 20 shareholder letter that headcount reductions would reduce its projected margin by about 120 basis points, or 1.2 percentage points, for the quarter ending Dec. 31. The forecast remains above the 24.5% margin reported for the same quarter last year. The company said the staffing changes support investment in its service.
Netflix expects fourth-quarter revenue of $13.442 billion, an 11.5% increase from a year earlier. It projected net income of $2.787 billion and diluted earnings of $0.67 per share. For the full year, it forecast $51.1 billion in revenue and a 31.5% operating margin.
In the quarter ended Sept. 30, revenue rose 11.8% to $12.874 billion. Net income was $3.664 billion, or $0.87 per diluted share. Netflix said membership, pricing and advertising contributed to revenue growth. Its fourth-quarter forecast points to a slightly slower annual increase in revenue.
The company lowered its 2026 advertising revenue forecast to about $2.7 billion from about $3 billion because some advertising capabilities took longer to introduce than expected. Netflix said subscription revenue growth had exceeded its expectations. The revised estimate leaves its advertising rollout as a key measure of progress alongside subscription growth.
Netflix also plans to expand its selection of licensed programming. Peter Rice is scheduled to become chief content officer on Oct. 26, replacing Bela Bajaria and overseeing series, film and live events across regions. Netflix co-CEO Ted Sarandos said Rice “understands what makes stories resonate.”
The company plans to introduce its ad-supported tier in 15 additional countries in 2027, with the first launches scheduled for March 2027.
