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Netflix (NFLX) is streaming lower to a new 52-week low following its Q3 results last night, despite an EPS beat, as the report did little to ease broader concerns surrounding decelerating revenue growth, heightened competition, and the pace of advertising expansion. Specifically, EPS of $0.87 increased 49% yr/yr and topped expectations, while revenue increased 11.8% yr/yr to $12.87 bln, in line with expectations. Revenue growth moderated from 13.4% in Q2 and 16.2% in Q1. Meanwhile, Q4 revenue guidance of $13.44 bln, implying further moderation to 11.5% yr/yr growth, fell below expectations, alongside EPS guidance of $0.67.

• Engagement trends remain mixed, with NFLX describing U.S. engagement as solid but acknowledging room for improvement, particularly in content execution and the need to accelerate viewing hours growth. Management also conceded that its U.S. content slate has not performed as strongly as desired. On a positive note, churn improved yr/yr both globally and in the U.S., while the response to recent price increases remained consistent with prior adjustments.
• Regional results also reflected mixed growth trends, with UCAN revenue growth improving to 11% from 10% in Q2, while EMEA slowed to 11% from 14%, LATAM to 17% from 21%, and APAC to 12% from 16%. India remained a bright spot, with viewing hours increasing 24% yr/yr and record quarterly paid net additions.
• Advertising was another source of disappointment, as NFLX lowered its FY26 advertising revenue forecast to $2.7 bln from $3.0 bln, citing delays in new product rollouts and partner integrations. While advertising revenue is still expected to increase more than 80% in FY26, management acknowledged that progress has fallen behind its original targets.
• Profitability remained a bright spot, with Q3 operating margin expanding 640 bps yr/yr to 34.6%, although the upside relative to management's forecast largely reflected expense timing. NFLX guided Q4 operating margin to 26.0%, up from 24.5% a year ago. For FY26, NFLX still expects an operating margin of 31.5%, up from 29.5% in FY25.
• Management maintained its objective of sustaining double-digit revenue growth, supported by its three primary growth drivers of membership expansion, pricing, and advertising. However, it did not provide a specific growth forecast for FY27, leaving uncertainty around whether revenue growth can stabilize or potentially reaccelerate from the approximately 13% expected in FY26.

Briefing.com Analyst Insight

Overall, NFLX continues to perform well financially, delivering strong earnings growth and expanding margins even as its revenue growth trajectory moderates. However, the Q3 report did little to alleviate concerns surrounding slowing growth, particularly as advertising revenue expectations were reduced. The slower rollout of advertising capabilities and continued concerns around viewing engagement raise questions about how quickly these growth opportunities can translate into stronger revenue performance. Additionally, while recent content leadership changes could improve U.S. execution, the benefits may take time to materialize. With Q4 guidance implying further deceleration, the upcoming FY27 outlook will be especially important in determining whether NFLX can stabilize revenue growth in double digits or faces a more prolonged slowdown.