Netflix Q3 revenue rises 11.8 per cent to $12.87 billion as India viewing surges

MUMBAI: Netflix’s latest quarter delivered a plot twist investors will want to watch: revenue and profits climbed, India viewing hours surged, but the streaming giant trimmed its forecasts for advertising revenue and free cash flow. The company’s September-quarter results point to continued subscription momentum, even as its advertising business takes longer than expected to reach its earlier targets.

In its shareholder letter dated 20 October, Netflix reported revenue of $12.87 billion for the third quarter of 2026, up 11.8 per cent year on year. Operating income rose 37 per cent to $4.46 billion, while operating margin expanded to 34.6 per cent from 28.2 per cent in the year-ago quarter.

Net income increased to $3.66 billion from $2.55 billion, and diluted earnings per share rose 49 per cent to $0.87. The company attributed its performance to subscription growth, price increases and advertising revenue, with membership growth supported by healthy retention across regions.

Netflix said churn improved year on year both globally and in the US, coming in better than it had forecast. That suggests fewer subscribers were leaving than the company had anticipated, helping it build on its existing membership base while continuing to raise prices.

The company expects revenue of $13.44 billion in the fourth quarter, representing year-on-year growth of approximately 11.5 per cent. For the full year, it forecasts revenue of $51.1 billion, up 13 per cent, with an operating margin of 31.5 per cent.

India emerged as a significant growth market during the quarter, with viewing hours increasing 24 per cent year on year. Viewing hours per member also rose by low-to-mid single digits, indicating that the increase was not limited to the overall audience but extended to engagement among existing members.

Netflix credited its content slate, led by Lock Upp, its first daily reality series, for helping drive viewing. The show generated the highest viewing hours of any title on Netflix in India during its first 91 days. Other titles contributing to the quarter’s performance included scripted series Musafir Cafe and Operation Safed Sagar.

The company also pointed to its transaction-based loyalty bundle with Flipkart as a factor in subscriber acquisition. The combination of programming and the distribution partnership helped Netflix record its largest-ever quarter for paid net additions in India. Revenue in the country grew approximately 18 per cent year on year on a foreign-exchange-neutral basis.

The numbers underline the role of local programming and distribution partnerships in a market where streaming platforms are competing for both viewing time and subscription spending. For Netflix, India’s performance provides a counterpoint to the more measured outlook for its advertising business.

The company expects advertising revenue to reach approximately $2.7 billion in 2026, down from its earlier projection of around $3 billion. Netflix attributed the revision to a slightly slower-than-expected rollout of certain advertising product capabilities.

The lower forecast comes as the company continues to build the technology and partnerships needed to attract advertisers. During the third quarter, Netflix extended programmatic access through globally available connected TV marketplace deals and added partnerships with MercadoLibre in Latin America and Adform across Europe, the Middle East and Africa.

It is also expanding measurement capabilities within demand-side platforms, including tools for assessing reach, frequency and attribution. These functions are important for advertisers seeking to understand how many people see their campaigns, how often they see them and what results the advertising delivers.

Netflix plans to introduce its advertising-supported tier in 15 additional countries in 2027. The first phase, scheduled for March, will cover nine countries in Europe, the Middle East and Africa, alongside Colombia, Peru and New Zealand.

The expansion would widen the market for Netflix’s lower-priced, advertising-supported offering. However, the revised revenue forecast indicates that growing the advertising business will take time, even as the company expands its international footprint and improves its tools for media buyers.

Subscription revenue growth has outperformed Netflix’s earlier expectations, according to its shareholder letter. The company also said member responses to its 2026 price increases remained consistent with previous adjustments and its expectations. It views this as evidence that engagement remains healthy and that subscribers continue to see value in the service.

Still, Netflix acknowledged investor concerns about the pace of viewing-hour growth and said it wants to accelerate it through continued investment in content, technology and monetisation. Its priorities are to deliver more entertainment value, improve the service through technology and strengthen monetisation. These efforts are intended to support acquisition and retention, enable periodic price increases and attract more advertising demand.

Netflix is also positioning itself as a broader entertainment destination as its audience approaches one billion people. Its offering combines original productions with licensed third-party content, giving the platform more ways to reach viewers and deepen engagement across markets.

In France, its partnership with broadcaster TF1 allows subscribers to access additional local series, films, news and sports within the platform. Netflix said early performance indicators suggested the arrangement was generating incremental viewing in the market. It has also secured a licensing agreement with Disney covering a range of current and library titles.

International programming remains another important part of its strategy. Netflix said non-English-language content accounted for more than a third of total viewing, compared with less than 10 per cent a decade ago. The figures highlight how stories made for particular markets have become a substantial part of its global catalogue.

Several international titles performed strongly during the quarter, including Facing El Chapo from Mexico, The Secret Woman from Denmark, The Perfect Lie from the Netherlands and Plastic Beauty from Japan. Netflix said these performances reflected long-term investment in stories that resonate with local audiences while retaining the potential to travel across borders.

The company is also looking to finish the year with a strong slate of films, series and live events. Planned releases and programming include new seasons of The Diplomat, Nobody Wants This and Lupin, the final season of Emily in Paris, and live NFL games on Thanksgiving Eve and Christmas Day. A boxing match between Tyson Fury and Anthony Joshua is also part of its planned live programming.

While viewing and subscription trends remain encouraging, Netflix’s cash flow outlook has become more cautious. The company generated $3.16 billion in cash from operating activities in the third quarter, compared with $2.83 billion a year earlier. Free cash flow rose to $2.88 billion from $2.66 billion.

Despite the year-on-year increase, Netflix lowered its full-year 2026 free cash flow forecast to approximately $12 billion from its earlier projection of $12.5 billion. The company said the revision was primarily due to the expected closing of a real estate transaction in the fourth quarter.

Netflix also continued returning capital to shareholders. It repurchased 63.9 million shares for $4.8 billion during the quarter, marking its largest quarterly share buyback to date. At the end of September, it held $8.2 billion in cash and cash equivalents and had gross debt of $15.3 billion.

The company said its capital allocation strategy remained unchanged. It will prioritise investment in its business, selective acquisitions and maintaining a healthy balance sheet before returning excess cash to shareholders through share repurchases.

Taken together, the results show a streaming business benefiting from stronger profitability, resilient subscriber retention and growing engagement in India, while facing a slower path towards its advertising ambitions. The $2.7 billion advertising forecast and the reduced $12 billion free cash flow outlook temper an otherwise strong quarterly performance.

For Netflix, the next phase will involve turning its growing audience into more consistent returns across subscriptions, advertising and content partnerships. Its India performance suggests local programming and distribution can deliver substantial gains, but the coming quarters will show whether its expanding advertising infrastructure can catch up with the momentum elsewhere in the business.