Netflix 3Q26 First Take: Q3 underwhelmed overall. Earnings slightly beat, but the quality was low given a modest bar and some timing mismatches between revenue and opex. More importantly, the Q4 guide missed even ex severance, so this print is unlikely to lift near-term sentiment.

In detail. Highlights below.

1) Q3 revenue rose 12%, or 11% on an FXN basis, with growth continuing to slow. The high base played a role, but a softer Q3 content slate and ad growth below plan also weighed.

2) Q3 OP was 6.8bn with OPM at 53%, up nearly 700bps YoY. This was not underlying strength, as last year’s base was depressed by a one-off Brazil tax, and Q3 saw some timing benefits in operating expenses.

3) Guide missed: Q4 revenue is guided to 13.4bn, implying similar growth to Q3. OP of 3.5bn is 6% below consensus, mainly due to severance (layoffs announced on Oct. 14: 1,000+ employees, ~6%); even adding back the sub-0.2bn cost, profit still trails the Street.

4) Notably, the company now expects FY ad revenue of 2.7bn, below the previously confident 3.0bn guide. Ads are a key pillar for growth expectations and valuation, which will likely further cap risk appetite.

5) FY FCF was cut by 0.5bn to 12.0bn, mainly due to a Q4 real-estate transaction. Q3 buybacks were 4.8bn, well above historical levels, with 22.3bn remaining under authorization; if Q4 runs at a similar pace, FY26 shareholder yield would be approx. 5%. $Netflix(NFLX.US)