English
Netflix matched Wall Street revenue expectations for the third quarter of 2026 and edged past earnings estimates, but the results came alongside slowing growth and a significant round of layoffs that signals a major strategic shift for the world’s largest streaming service.
Revenue Grows but Momentum Slows
Netflix reported Q3 2026 revenue of $12.87 billion, an 11.8% increase year over year. However, that figure marks a notable deceleration from the 17% top-line growth the company recorded in the same period a year earlier. Net income rose to $3.66 billion, up from $2.55 billion in Q3 2025, translating to earnings of 87 cents per share. The company’s operating margin came in at 34.6%, above the 33.2% analysts had expected.
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Wall Street analysts had forecast revenue of $12.87 billion and earnings per share of 82 cents, according to LSEG Data & Analytics. Netflix met the revenue target and slightly exceeded the earnings projection.
Layoffs and Leadership Overhaul
Just before the earnings release, Netflix cut approximately 1,000 employees — around 6% of its total workforce. The company also removed chief content officer Bela Bajaria and replaced her with veteran television executive Peter Rice. In addition, Netflix parted ways with head of film Dan Lin, his deputy Doug Belgrad, and director of original series Carolina Garcia.
Co-CEOs Ted Sarandos and Greg Peters addressed the layoffs in the company’s Q3 shareholder letter. However, they did not explain the specific reasons behind the content leadership changes. Instead, they framed the restructuring in broad terms. “These organizational changes enable us to continue to aggressively invest in high impact areas to improve our service, and drive growth and innovation,” the executives wrote, using language similar to an internal memo about the job cuts.
Engagement Decline Raises Concern
A key concern driving the restructuring is falling per-subscriber engagement. Netflix’s July 2026 viewing report for the first half of the year showed global hours viewed rose just 2% year over year in total. Meanwhile, per-user viewing time has fallen sharply. Analysts at Jefferies estimate that average monthly viewing time per member globally dropped from 66 hours in the first half of 2023 to roughly 49 hours in the first half of 2026.
In their shareholder letter, Sarandos and Peters acknowledged investor concern about viewing hours. They argued that member response to 2026 price increases remained consistent with past price changes, suggesting engagement stays healthy. “We do seek to accelerate growth in view hours as well, and we’re confident we’ll do that by relentlessly focusing and executing against the aforementioned strategy,” the executives wrote.
Q4 Outlook and Reporting Changes
Looking ahead, Netflix projects a Q4 2026 operating margin of 26.0%. That figure includes a 120 basis point negative impact from costs tied to the recent layoffs. Even so, it would represent an improvement over the 24.5% operating margin Netflix posted in Q4 2025.
Netflix also confirmed a change to how it publishes viewing data. Starting in 2027, the company will release its “What We Watched” report annually in the first quarter, rather than linking it to quarterly earnings. “The goal of separating the publication of the report from our earnings results is to keep the focus on our primary financial metrics — revenue and operating profit,” the company said. The move reflects Netflix’s broader effort to shift investor attention toward financial performance as engagement metrics come under greater scrutiny.
