Netflix topped its own profit guidance for the third quarter of 2026, according to the shareholder letter the company filed with the SEC Tuesday, as the ad-supported tier and password-sharing crackdown continued to pad the bottom line.

Revenue rose 12% year over year (11% excluding currency effects), in line with the company's own forecast. Operating income reached $4.5 billion, up 37% from a year earlier, for an operating margin of 34.6% — well above the 28.2% margin Netflix posted in the same quarter last year, and ahead of its own 33.2% guidance. Diluted earnings per share came in at $0.87, compared with $0.59 in the third quarter of 2025.

Why the Beat

Netflix attributed the margin beat mainly to the timing of certain expenses and slightly higher-than-expected revenue, rather than to any single new initiative. The company has spent the past two years leaning on its ad-supported subscription tier and tighter enforcement against shared passwords to push both subscriber counts and average revenue per member higher — a strategy that has repeatedly outperformed Wall Street's expectations since its 2022 rollout.

OPERATING MARGIN OF 34.6%, UP FROM 28.2% A YEAR EARLIER

The results arrive in the middle of a crowded earnings week for Netflix's streaming and media rivals, with investors watching closely for signs of whether the ad-tier strategy that has powered Netflix's recent growth is nearing its ceiling or still has room to run.

Looking Ahead

For the fourth quarter, Netflix projected revenue of about $13.4 billion, roughly 12% growth, with an operating margin of 26.0% that the company said includes about 120 basis points of drag from recent headcount reductions. For the full year, Netflix now expects revenue of $51.1 billion, up 13% from 2025.

The company did not disclose updated global subscriber totals in Tuesday's letter, continuing a practice it adopted after shifting its headline growth metric toward revenue and engagement figures rather than subscriber counts alone.