Netflix Q3 results preview: can advertising deliver the next phase of growth? 

Netflix Q3 results preview: can advertising deliver the next phase of growth?

Netflix reports its third-quarter results on Tuesday 20 October, with investors looking for evidence that its advertising business, pricing power and content pipeline can sustain growth as the streaming market matures.

The streaming giant has continued to expand revenue and profitability, but its outlook disappointed investors in July. Management forecast third-quarter revenue of $12.86 billion and diluted earnings per share of 82 cents, below analysts’ expectations at the time of $13 billion and 84 cents respectively. The shares fell sharply in after-hours trading following the announcement.

The upcoming results will therefore be about more than whether Netflix meets its own targets. Investors want reassurance that its business can continue growing at an attractive rate while it develops new revenue streams beyond subscriptions.

According to LSEG Data & Analytics, analysts expect Q3 revenue to come in at $12.88 billion, around 12% higher than in Q3 2025, a pre-tax profit of $4.13 billion, up 33% compared to a year ago, and earnings per share (EPS) of 82 cents, around 40% higher than in Q3 2025.

Those looking to trade around the results can do so through spread betting or CFD trading, while longer-term investors can access Netflix shares through IG Invest or our share dealing service.

Revenue growth remains solid, but expectations are high

In the second quarter, Netflix reported revenue of $12.56 billion, up 13% year on year, while diluted earnings per share came in at 80 cents. Operating margin was 33%, in line with guidance. For the full year, management narrowed its revenue forecast to $51 billion–$51.4 billion and maintained its operating-margin target of 31.5%.

For Q3, the company’s $12.88 billion revenue forecast represents a continuation of double-digit expansion, but investors will want to see whether Netflix can outperform its own guidance and provide a stronger outlook for the final quarter.

The distinction matters because Netflix is no longer simply a subscriber-growth story. It has more than 325 million paying memberships, and management has increasingly emphasised revenue and operating profit as the best measures of progress. The company stopped reporting quarterly subscriber numbers in 2025 and plans to publish viewing-hours data annually rather than twice a year from 2027.

That shift places greater emphasis on monetisation: extracting more value from its existing audience through pricing, advertising and a broader entertainment offering.

Advertising is the biggest growth opportunity

Netflix’s advertising-supported subscription tier is central to its longer-term expansion plans. It gives the company an additional source of income from viewers who pay less for their subscriptions, while opening up a potentially significant advertising market.

Management expects advertising revenue to reach $3 billion in 2026. However, the business has been developing more slowly than some analysts had anticipated. In Q2, advertising revenue was reported at approximately $618 million, with growth falling short of analyst expectations. S&P Global subsequently highlighted advertising as a key reason for the cautious market reaction to the results.

Investors will be looking for evidence that Netflix is improving its ability to attract advertisers, increase the value of its advertising inventory and turn its large audience into a more profitable business. Analysts expect advertisement revenue to rise by around 22%, to $806.33 million in Q3, when compared to a year ago.

Live programming could help. Netflix is expanding its live-event offering, including NFL programming, to create more opportunities for advertisers to reach audiences at scale. These events could also help distinguish the service from rivals that compete primarily through on-demand films and series.

The risk is that advertising takes longer to scale than expected. If revenue growth disappoints while Netflix continues investing in its advertising technology and sales infrastructure, investors may question how quickly the new business can contribute meaningfully to profits.

Content and engagement remain crucial

Netflix’s ability to produce compelling programmes remains fundamental to its pricing power and customer retention.

The company said viewing hours grew 2% in the first half of 2026, compared with 1.5% growth during 2025. Management described engagement as healthy despite competition from traditional media companies, YouTube and short-form video platforms such as TikTok.

The Q3 results should help investors assess whether its content slate continues to encourage customers to watch regularly and renew their subscriptions. A strong pipeline of popular series, films and live events supports price increases, reduces the risk of cancellations and makes the advertising proposition more attractive.

However, viewing hours alone do not guarantee financial success. Netflix must balance the cost of producing and licensing content against its ability to generate revenue and maintain margins.

Its use of generative artificial intelligence is another area to watch. Management said AI was already being used across approximately 300 titles, primarily in post-production, and that adoption was increasing. If the technology can improve workflows or reduce production costs without compromising quality, it could support profitability over time.

Pricing power versus competition

Price increases remain another potential driver of revenue growth. Netflix can raise subscription prices in selected markets as it invests in content and improves its service, but there is a limit to how much customers will tolerate before reconsidering their spending.

The company faces competition not only from Disney and other streaming platforms but also from free online video, gaming and social media. Households increasingly have a wide range of entertainment choices, making the perceived value of each subscription more important.

Netflix’s large audience, international reach and recommendation technology give it advantages, but the challenge is to maintain engagement while monetising that audience more effectively.

Investors will be watching management’s commentary on pricing, retention and content demand for signs that revenue growth is sustainable rather than dependent on repeated price increases.

For those wanting to understand more about how to assess shares in high-growth consumer technology businesses where monetisation and margins matter as much as subscriber numbers, our resources on investing for beginners cover the key concepts in accessible detail.

Analyst ratings and technical analysis

Analysts rate Netflix’s as a ‘buy’ with a mean long-term price target at $94.18, around 34% above current levels (as of 12 October 2026).

TipRanks has a Smart Score of ‘6 Neutral’ for Netflix but a ‘buy’ rating.

The Netflix share price – down 25% year-to-date - doesn’t reflect the analysts’ positive outlook. It followed its 2023-to-June 2025 bull market with an around 50% bear market from its $134.12 late June 2025 peak.

Netflix weekly candlestick chart

For now the Netflix share price seems to have found support slightly above its July $65.08 low but a fall through this level may push the August 2024 low at $58.70 and perhaps also the April 2024 low at $54.20 to the fore.

For the bulls to regain control a rise and daily chart close above the early September high at $83.60 would need to be seen. Such a move represents a 15% advance in the Netflix share price, though.

Netflix daily candlestick chart

Minor support above the mid-July trough at $65.08 sits at the 5 October low at $66.54 with minor resistance being seen between the 10-to-17 September lows and the 21 September high at $72.87.

What to watch in the Q3 results

Investors should focus on five key areas:

• Revenue: whether Netflix meets or exceeds its $12.88 billion forecast and delivers the expected double-digit growth
• Earnings and margins: whether profitability remains on track towards the 31.5% full-year operating-margin target
• Advertising: progress towards the $3 billion full-year revenue goal and management’s outlook for monetisation
• Engagement and content: evidence that its programming slate is sustaining viewing and supporting pricing power
• Q4 guidance: whether Netflix can deliver a strong finish to 2026 and maintain confidence in its longer-term growth trajectory

Netflix enters its Q3 results with a sizeable audience, a growing range of revenue opportunities and a business that continues to generate substantial revenue. Yet the July reaction demonstrated that solid growth may not be enough when investors expect more.

The bottom line: Netflix needs to show that advertising can become a meaningful second growth engine alongside subscriptions. A solid revenue result, resilient margins and clearer evidence of advertising progress could restore confidence in its longer-term prospects. Another cautious forecast, however, could leave investors questioning whether the streaming leader can sustain its growth as the market matures.

How to invest in Netflix shares

1. Do your research on Netflix, the Q3 results on 20 October and the key metrics to watch
2. Download IG Invest or open a share dealing account with us
3. Search for Netflix (NFLX) in our platform or app
4. Choose the the number of shares or value of money you’d like to invest
5. Place your trade