Netflix's Q3: Content Amortization Grew About Half as Fast as Revenue, and the Ad Forecast Was Cut
On October 20, 2026, Netflix reported third-quarter revenue of $12.9 billion, up 11.8% from a year earlier and in line with its forecast. Content amortization was $4.2 billion, up 5.8%.
What we said to watch
Our earlier article on Netflix said to watch whether revenue grows faster than content amortization, the charge that spreads the cost of the shows Netflix makes and licenses over the years people watch them.
What came out
On October 20, 2026, Netflix reported third-quarter revenue of $12.9 billion, up 11.8% from a year earlier and in line with its forecast. Content amortization was $4.2 billion, up 5.8%.
Table 1 — Netflix, Q2 and Q3 2026
| Measure | Q2 2026 | Q3 2026 |
|---|---|---|
| Revenue growth | 13.4% | 11.8% |
| Revenue growth, without currency | 12% | 11% |
| Content amortization growth | 12.5% | 5.8% |
| Operating margin | 33.4% | 34.6% |
| Operating margin, year earlier | 34.1% | 28.2% |
The operating margin was 34.6%, above the 33.2% Netflix had forecast. Netflix said the difference was "primarily due to the timing of expenses." The year-earlier margin of 28.2% included a Brazilian tax expense of about $619 million. Netflix said the expense lowered that margin by more than five percentage points. The tax expense was about 5.4% of that quarter's revenue, so it accounts for most of the 6.4-point rise from a year earlier.
In July, Netflix had said amortization would grow more slowly in the second half of 2026 than in the first. Over the first nine months, amortization grew 9.5%, against revenue growth of 13.7%. Among Netflix's reported cost lines, technology and development grew fastest in Q3, up 21%.
Free cash flow was $2.9 billion in Q3, against net income of $3.7 billion. In Q2, free cash flow was $1.5 billion, against net income of $3.4 billion. Cash spent on content was about 1.2 times amortization in Q3 and in the first nine months. Netflix plans 1.1 times for the full year.
Revenue growth without currency slowed in three of four regions.
Table 2 — Revenue growth without currency, by region
| Region | Q2 2026 | Q3 2026 |
|---|---|---|
| US and Canada | 10% | 11% |
| Europe, Middle East and Africa | 11% | 9% |
| Latin America | 16% | 12% |
| Asia-Pacific | 18% | 15% |
What changed
The advertising forecast. Netflix now expects about $2.7 billion of advertising revenue in 2026, down from about $3 billion in July. The letter cited a "slightly slower than expected rollout of some ad product capabilities." On October 20, Greg Peters, one of Netflix's two chief executives, said, "we are currently a bit behind our aggressive target for the year." Advertising is now about 5% of Netflix's expected 2026 revenue, down from about 6%.
The full-year forecasts. The revenue forecast fell about $0.1 billion from the middle of the July range, less than the $0.3 billion cut to advertising, because subscription revenue grew faster than Netflix had expected.
Table 3 — Netflix's 2026 forecast, July and October
| 2026 forecast | July | October |
|---|---|---|
| Revenue | $51.0–51.4B | $51.1B |
| Operating margin | 31.5% | 31.5% |
| Advertising revenue | about $3B | about $2.7B |
| Free cash flow | about $12.5B | about $12.0B |
Netflix attributed the lower free cash flow forecast "primarily" to a real estate transaction it expects to close in the fourth quarter. The unchanged operating margin now includes about 0.3 points of cost from headcount reductions Netflix recently announced.
What to watch next
- Amortization against revenue in Q4. Netflix forecasts Q4 revenue of $13.4 billion, up 12%. Netflix did not repeat its July forecast of about 10% amortization growth for 2026. If the 10% forecast still holds, fourth-quarter amortization would grow about 11%, close to the 12% forecast for revenue growth.
- The Q4 operating margin. Netflix forecasts 26.0%, against 24.5% in Q4 2025. The forecast includes about 1.2 points of cost from the headcount reductions.
- Advertising. Compare Netflix's 2026 advertising total, if it gives one with the January results, with about $2.7 billion. Netflix plans to offer the plan with ads in 15 more countries in 2027, starting in March.
- 2027 forecasts. Neumann said Netflix will give its 2027 forecasts, including the operating margin, with its Q4 2026 results in January 2027.
Video: Netflix Explained: Why Sales Must Outgrow Content Costs, the video version of our earlier article on Netflix.
Why does Netflix's margin depend on how fast content amortization grows? The book sets Netflix beside Adobe, which is still paid for software it wrote years ago: Earnings Driver.
Sources: Netflix shareholder letters for Q3 2025, Q4 2025, Q2 2026 (July 16, 2026) and Q3 2026 (October 20, 2026), and the earnings interviews of July 16 and October 20, 2026 (ir.netflix.net).
For sources that work for any company — filings, earnings calendars, consensus estimates — see Where to find the numbers.
Educational only, not investment advice. Figures as of the periods noted.
