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A clean comparison shrinks the 6.4-point margin jump

Operating margin of 34.6% sits 6.4 points above Q3 FY2025, whose costs included a Brazil tax charge, so much of the jump is that comparison.

Q3 FY2026, the quarter to Sep 30, 2026 · 10-Q filed Oct 21, 2026

Q3 FY2026 · revenue
$12.9B+11.8% on the year
Operating margin
34.6%
Net income
$3.7B
Free cash flow, quarter
$2.9B

Largest source of revenue: United States and Canada (UCAN), 43.7% of the total.

Follow the money

Where Netflix's money goes

Tap the picture to explore the flow: levels, scale, every line and its figures.
Key insights · Q3 FY2026
  1. 01

    A clean comparison shrinks the 6.4-point margin jump

    Operating margin of 34.6% sits 6.4 points above Q3 FY2025, whose costs included a Brazil tax charge, so much of the jump is that comparison.

    Why it matters

    Operating income was $4.46B on revenue of $12.87B, a 34.6% margin, against 28.2% in Q3 FY2025. The filing attributes the rise to lower cost of revenues and revenue outgrowing sales, marketing and administrative costs. It says cost of revenues fell mainly because the prior-year period included an expense for non-income tax assessments in Brazil, partly offset by higher content amortization.1

    Quarters without that charge give a cleaner reference. In Q2 FY2026 operating income was $4.19B on revenue of $12.56B, a 33.4% margin, and in Q2 FY2025 it was $3.77B on $11.08B. Cost of revenues took 47.2% of revenue this quarter against 53.6% in Q3 FY2025, and was $6.04B on $12.56B of revenue in Q2 FY2026.1

    AnalysisOur reading: set against quarters without the charge, the margin is still rising, from 33.4% in Q2 FY2026 to 34.6%, but in steps far smaller than the year-on-year jump suggests. Most of the headline gain is the absence of a one-time cost, not a sudden change in what content costs. The filing also says the company manages to an operating margin target, not to the highest margin it could reach.

  2. 02

    Operating margin rose, free cash flow margin slipped

    Free cash flow was 22.4% of revenue against 23.1% a year earlier, so the 6.4-point operating margin gain did not carry into cash.

    Why it matters

    Free cash flow was $2.88B, 78.7% of net income of $3.66B, against $2.66B and 104.5% of net income a year earlier. Operating cash flow was $3.16B, 0.86 times net income, against $2.83B a year earlier. The filing names unfavorable changes in working capital and higher payments for content assets as the offsets to the rise in net income.1

    Capital spending is not the gap. Purchases of property and equipment were $278.8M, up from $164.7M a year earlier, but only 2.2% of revenue. The investment that matters sits inside operating cash flow: the filing says original content, especially content the company produces and owns, requires "more cash upfront relative to licensed content", paid while it is made and amortized after release.1

    AnalysisOur reading: the Brazil assessments tilt the two comparisons in opposite directions. The expense lowered last year's profit, while the filing says this year's nine-month working capital includes non-routine payments for those assessments. Over 2026 so far, that makes profit look better against last year and cash look worse.

    The gap is not new. Free cash flow was 128.1% of net income in FY2023 and 86.2% in FY2025, and in FY2024 it was $6.92B against net income of $8.71B. In Q2 FY2026 free cash flow was $1.53B against net income of $3.40B, so this quarter's 78.7% is a recovery from the quarter before.1

  3. 03

    Technology spending now grows faster than revenue

    Technology and development rose 21.0% to $1.03B against revenue growth of 11.9%, pulling further ahead of sales and marketing at $837.1M.

    Why it matters

    Technology and development was $1.03B, 8.0% of revenue, up from $853.6M. The filing attributes the rise mainly to personnel costs for the people who build and change the user interface, recommendations and infrastructure. Sales and marketing rose 6.5% to $837.1M from $786.3M, so the lead of technology and development over sales and marketing widened from a year earlier.1

    This is the one cost line the filing says held the margin back, with technology and development "growing at a faster rate than revenues". The added sales and marketing cost was mainly personnel, "primarily due to the growth in advertising sales headcount".1

    AnalysisOur reading: the overview lists games, live programming and an ad-supported plan, and each needs engineering before it earns revenue. The open question is whether this spend shows up later as engagement, pricing power or advertising yield, or stays a heavier cost line. The filing gives the cost, not a return on it.

Sources

  1. 1.Netflix 10-Q for the period to 2026-09-30 (the filing), Oct 21, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $1.2B in FY2007 to $45.2B in FY2025, the operating margin from 7.6% to 29.5%, over 18 years.

  • Revenue$45.2B
  • Operating income$13.3B
  • Operating margin29.5%
Period
Q3 FY2026
Revenue
$12.9B
Operating income
$4.5B
Operating margin
34.6%
Net income
$3.7B
Free cash flow
$2.9B
Business performance

Does the profit turn into cash?

Q3 FY2026: free cash flow of $2.9B against net income of $3.7B in the quarter.

  • Operating cash flow$10.1B
  • Capital expenditure$688.2M
  • Free cash flow$9.5B
  • Net income$11.0B

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

Revenue Recognition - Schedule of Revenue by Region (Details). The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
52.8%
Source10-Q, Derived from Revenues and Cost of revenues in the 10-Q filed 2026-10-21
Operating margin
34.6%
Source10-Q, Derived from Operating income and Revenues in the 10-Q filed 2026-10-21
Net margin
28.5%
Source10-Q, Derived from Net income and Revenues in the 10-Q filed 2026-10-21
Free cash flow, quarter
$2.9B
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-21
Free cash flow margin, quarter
22.4%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-21
Cash conversion, quarter
0.86x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-21
Capital spending, quarter
2.2%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-21
Revenue growth
+11.8%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

Geographic markets

United States and Canada (UCAN)$5.6B43.7%
Europe, Middle East, and Africa (EMEA)$4.1B31.9%
Latin America (LATAM)$1.6B12.4%
Asia-Pacific (APAC)$1.5B11.9%

Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-21

StatementEquityComponents

Amount of gains (losses) reclassified from AOCI$00.0%
Amount excluded from assessment of effectiveness and recognized in earnings based on amortization approach$00.0%
Amount of gains (losses) reclassified from AOCI-$713.0K-0.0%

These items do not sum to total revenue; the filing states them beside it. Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-21

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ3 FY2026Of revenueSource
Cost of revenues$6.1B47.2%Source10-Q, us-gaap:CostOfRevenue, as reported in the 10-Q filed 2026-10-21
Operating income$4.5B34.6%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-21

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement15 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeOf revenueSource
Income Statement
Revenues$12.87B$11.51B+12%100%Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-21
Cost of revenues$6.08B$6.16B-1.4%47.2%Source10-Q, us-gaap:CostOfRevenue, as reported in the 10-Q filed 2026-10-21
Sales and marketing$837.1M$786.3M+6.5%6.5%Source10-Q, us-gaap:SellingAndMarketingExpense, as reported in the 10-Q filed 2026-10-21
Technology and development$1.03B$853.6M+21%8.0%Source10-Q, us-gaap:ResearchAndDevelopmentExpense, as reported in the 10-Q filed 2026-10-21
General and administrative$466.4M$457.9M+1.8%3.6%Source10-Q, us-gaap:GeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-10-21
Operating income$4.46B$3.25B+37%34.6%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-21
Other income (expense):
Interest expense (shown as a deduction)($184.7M)$175.3M+5.4%1.4%Source10-Q, us-gaap:InterestExpenseNonoperating, as reported in the 10-Q filed 2026-10-21
Interest and other income (expense)$43.0M$36.5M+18%0.3%Source10-Q, us-gaap:NonoperatingIncomeExpense, as reported in the 10-Q filed 2026-10-21
Income Statement
Income before income taxes$4.32B$3.11B+39%33.5%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-10-21
Provision for income taxes (shown as a deduction)($653.0M)$562.5M+16%5.1%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-10-21
Net income$3.66B$2.55B+44%28.5%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-21
Earnings per share:
Basic (in USD per share)$1$1+48%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-10-21
Diluted (in USD per share)$1$1+47%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-10-21
Weighted-average shares of common stock outstanding:
Basic (in shares)4,134,463,0004,244,553,000-2.6%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-10-21
Diluted (in shares)4,195,127,0004,340,392,000-3.3%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-10-21
Cash flow statement32 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ3 FY2026A year earlierChangeSource
Cash flows from operating activities:
Net income$3.66B$2.55B+44%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-21
Adjustments to reconcile net income to net cash provided by operating activities:
Additions to content assets (shown as a deduction)($5.16B)$4.65B+11%Source10-Q, nflx:AdditionsToStreamingContentAssets, as reported in the 10-Q filed 2026-10-21
Change in content liabilities$93.5M$24.3M+285%Source10-Q, nflx:ChangeInStreamingContentLiabilities, as reported in the 10-Q filed 2026-10-21
Amortization of content assets$4.24B$4.00B+5.8%Source10-Q, nflx:CostOfServicesAmortizationOfStreamingContentAssets, as reported in the 10-Q filed 2026-10-21
Depreciation and amortization of property, equipment and intangibles$107.1M$87.3M+23%Source10-Q, us-gaap:DepreciationDepletionAndAmortization, as reported in the 10-Q filed 2026-10-21
Stock-based compensation expense$134.0M$81.0M+65%Source10-Q, us-gaap:ShareBasedCompensation, as reported in the 10-Q filed 2026-10-21
Foreign currency remeasurement loss (gain) on debt (shown as a deduction)($9.2M)$1.7M+437%Source10-Q, us-gaap:ForeignCurrencyTransactionGainLossBeforeTax, as reported in the 10-Q filed 2026-10-21
Other non-cash items (shown as a deduction)(-$119.7M)-$142.3M-16%Source10-Q, us-gaap:OtherNoncashIncomeExpense, as reported in the 10-Q filed 2026-10-21
Deferred income taxes$182.1M$20.5M+786%Source10-Q, nflx:DeferredIncomeTaxExpenseBenefitIncludingReclassifications, as reported in the 10-Q filed 2026-10-21
Changes in operating assets and liabilities:
Other current assets (shown as a deduction)($136.4M)$169.6M-20%Source10-Q, us-gaap:IncreaseDecreaseInOtherCurrentAssets, as reported in the 10-Q filed 2026-10-21
Accounts payable$46.2M$139.5M-67%Source10-Q, us-gaap:IncreaseDecreaseInAccountsPayable, as reported in the 10-Q filed 2026-10-21
Accrued expenses and other liabilities$85.5M$707.2M-88%Source10-Q, us-gaap:IncreaseDecreaseInAccruedLiabilities, as reported in the 10-Q filed 2026-10-21
Deferred revenue-$17.8M-$3.7M+384%Source10-Q, us-gaap:IncreaseDecreaseInContractWithCustomerLiability, as reported in the 10-Q filed 2026-10-21
Other non-current assets and liabilities (shown as a deduction)($181.8M)$97.6M+86%Source10-Q, us-gaap:IncreaseDecreaseInOtherNoncurrentAssetsAndLiabilitiesNet, as reported in the 10-Q filed 2026-10-21
Cash flows from operating activities:
Net cash provided by operating activities$3.16B$2.83B+12%Source10-Q, us-gaap:NetCashProvidedByUsedInOperatingActivities, as reported in the 10-Q filed 2026-10-21
Cash flows from investing activities:
Purchases of property and equipment (shown as a deduction)($278.8M)$164.7M+69%Source10-Q, us-gaap:PaymentsToAcquirePropertyPlantAndEquipment, as reported in the 10-Q filed 2026-10-21
Acquisitions (shown as a deduction)($0)$0Source10-Q, us-gaap:PaymentsToAcquireBusinessesNetOfCashAcquired, as reported in the 10-Q filed 2026-10-21
Purchases of investments (shown as a deduction)($52.5M)$3.9M+1,265%Source10-Q, us-gaap:PaymentsToAcquireInvestments, as reported in the 10-Q filed 2026-10-21
Proceeds from maturities and sales of investments$0$176.3MSource10-Q, us-gaap:ProceedsFromSaleMaturityAndCollectionsOfInvestments, as reported in the 10-Q filed 2026-10-21
Other investing activities (shown as a deduction)($0)-$36.2MSource10-Q, us-gaap:PaymentsForProceedsFromOtherInvestingActivities, as reported in the 10-Q filed 2026-10-21
Net cash provided by (used in) investing activities-$331.3M$43.9MSource10-Q, us-gaap:NetCashProvidedByUsedInInvestingActivities, as reported in the 10-Q filed 2026-10-21
Cash flows from financing activities:
Proceeds from issuance of debt$992.6M$0Source10-Q, us-gaap:ProceedsFromIssuanceOfDebt, as reported in the 10-Q filed 2026-10-21
Repayments of debt (shown as a deduction)($0)$0Source10-Q, us-gaap:RepaymentsOfLongTermDebt, as reported in the 10-Q filed 2026-10-21
Proceeds from issuance of common stock$74.7M$70.2M+6.4%Source10-Q, us-gaap:ProceedsFromStockOptionsExercised, as reported in the 10-Q filed 2026-10-21
Repurchases of common stock (shown as a deduction)($4.80B)$1.86B+158%Source10-Q, us-gaap:PaymentsForRepurchaseOfCommonStock, as reported in the 10-Q filed 2026-10-21
Taxes paid related to net share settlement of equity awards (shown as a deduction)($5.2M)$6.2M-17%Source10-Q, us-gaap:PaymentsRelatedToTaxWithholdingForShareBasedCompensation, as reported in the 10-Q filed 2026-10-21
Other financing activities-$20.3M$55.8MSource10-Q, us-gaap:ProceedsFromPaymentsForOtherFinancingActivities, as reported in the 10-Q filed 2026-10-21
Net cash used in financing activities-$3.75B-$1.74B+116%Source10-Q, us-gaap:NetCashProvidedByUsedInFinancingActivities, as reported in the 10-Q filed 2026-10-21
Statement of Cash Flows
Effect of exchange rate changes on cash, cash equivalents and restricted cash$19.0M-$21.7MSource10-Q, us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-21
Net increase (decrease) in cash, cash equivalents and restricted cash-$905.0M$1.11BSource10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect, as reported in the 10-Q filed 2026-10-21
Cash, cash equivalents and restricted cash at beginning of period$9.10BSource10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-21
Cash, cash equivalents and restricted cash at end of period$8.20B$9.29B-12%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-21
Balance sheet24 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeSource
Current assets:
Cash and cash equivalents$8.19BSource10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-10-21
Short-term investments$28.7MSource10-Q, us-gaap:ShortTermInvestments, as reported in the 10-Q filed 2026-10-21
Other current assets$5.00BSource10-Q, us-gaap:OtherAssetsCurrent, as reported in the 10-Q filed 2026-10-21
Total current assets$13.22BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-10-21
Assets
Content assets, net$34.61BSource10-Q, nflx:ContentAssetsNetNoncurrent, as reported in the 10-Q filed 2026-10-21
Property and equipment, net$2.56BSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-10-21
Other non-current assets$8.29BSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-10-21
Total assets$58.68BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-10-21
Current liabilities:
Current content liabilities$3.89BSource10-Q, nflx:ContentLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-21
Accounts payable$860.1MSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-10-21
Accrued expenses and other liabilities$3.30BSource10-Q, us-gaap:AccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-21
Deferred revenue$1.78BSource10-Q, us-gaap:ContractWithCustomerLiabilityCurrent, as reported in the 10-Q filed 2026-10-21
Short-term debt$2.47BSource10-Q, us-gaap:ShortTermBorrowings, as reported in the 10-Q filed 2026-10-21
Total current liabilities$12.30BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-10-21
Liabilities and Stockholders’ Equity
Non-current content liabilities$1.72BSource10-Q, nflx:ContentLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-21
Long-term debt$12.66BSource10-Q, us-gaap:LongTermDebtNoncurrent, as reported in the 10-Q filed 2026-10-21
Other non-current liabilities$2.71BSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-21
Total liabilities$29.40BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-10-21
Stockholders’ equity:
Common stock, $0.001 par value; 49,900,000,000 shares authorized at September 30, 2026 and December 31, 2025; 4,106,325,903 and 4,222,162,150 issued and outstanding at September 30, 2026 and December 31, 2025, respectively$7.90BSource10-Q, us-gaap:CommonStockValue, as reported in the 10-Q filed 2026-10-21
Treasury stock at cost (477,363,677 and 346,541,145 shares at September 30, 2026 and December 31, 2025, respectively) (shown as a deduction)($33.23B)Source10-Q, us-gaap:TreasuryStockCommonValue, as reported in the 10-Q filed 2026-10-21
Accumulated other comprehensive loss-$9.5MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-10-21
Retained earnings$54.63BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-10-21
Total stockholders’ equity$29.29B$25.95B+13%Source10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-10-21
Liabilities and Stockholders’ Equity
Total liabilities and stockholders’ equity$58.68BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-10-21

About this data

Source
Netflix 10-Q, accession 0001065280-26-000291, filed Oct 21, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Netflix's model up, and what could bend it

Competitive edge

  • Operating income grew far faster than revenue since FY2018

    From FY2018 to FY2025 cost of revenues fell from 63.1% to 51.5% of revenue, lifting operating income from $1.61B to $13.33B.

    The detail

    Revenue rose from $15.79B in FY2018 to $45.18B in FY2025, while operating income rose from $1.61B to $13.33B. Cost of revenues, which the filing says consists primarily of the amortization of content assets, took 63.1% of revenue in FY2018 and 51.5% in FY2025.1

    AnalysisOur reading: a series costs the same however many members watch it, so a larger membership spreads each title's cost thinner. The stated strategy, to grow "within the parameters of our operating margin target", means the company chooses how much of that gain to keep and how much to put back into content.

  • Revenue grows on price and members, not marketing

    Sales and marketing rose 6.5% while revenue rose 11.9%, so marketing fell to 6.5% of revenue as pricing and memberships carried growth.

    The detail

    The filing says revenue growth "reflects increases in memberships and pricing", with higher advertising revenue on top. Sales and marketing was $837.1M, 0.33 points less of revenue than a year earlier. Plans vary by country and by features, including an ad-supported plan, so the same catalog is sold at several prices.1

    AnalysisOur reading: a member who stays and accepts a higher price needs no new acquisition spending, which is why a price increase can reach operating income without a matching rise in marketing cost.

  • Every region grew at double digits on one catalog

    United States and Canada brought 43.7% of revenue, so most sales come from elsewhere, and Latin America grew fastest at 16.9%.

    The detail

    All four regions grew: Latin America 16.9% to $1.60B, Asia-Pacific 12.3% to $1.54B, EMEA 11.0% to $4.11B and United States and Canada 11.0% to $5.63B. Latin America's share of revenue rose 0.54 points to 12.4%. The filing's constant currency table shows Latin America growing less in local currency than as reported, and Asia-Pacific growing more.1

    AnalysisOur reading: a title made once can stream in every region, so the cost of the catalog is shared while revenue grows in markets at different stages of adoption.

What to watch

  • The pricing lever can slow sign-ups

    The filing warns that price changes may affect membership growth and plan choice, the same lever it credits for this quarter's revenue growth.

    The detail

    The filing: "The prices of our streaming plans, and periodic changes to these prices, may impact growth in memberships and the plans that both new and existing members choose, including the number of members that select our ad-supported subscription." It also lists actions by competitors and price changes and testing among the factors that could move results.1

    AnalysisOur reading: a move toward the ad-supported plan only holds revenue per member if advertising makes up the difference. The filing gives advertising's growth but not its margin, so that trade cannot yet be measured from the filing.

  • Content commitments come before the revenue

    Originals are paid for while they are made, and the filing says obligations for future titles not yet known are expected to be significant.

    The detail

    The filing: "Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content." Part of the content obligations is not on the balance sheet because it had not met the criteria for recognition, and obligations for unknown future titles are "expected to be significant".1

    Over the nine months cash and short-term investments fell and debt rose, which the filing attributes to share repurchases, purchases of property and equipment and acquisitions, offset by operating cash and new debt. Interest expense was $184.7M in the quarter, 4.1% of operating income, against 5.4% a year earlier.1

    AnalysisOur reading: interest is light against current profit, but content, repurchases and debt service now draw on the same cash. The filing notes that new financing may not be available "on terms acceptable to us or at all".

  • Tax rates and currency swing the reported numbers

    Net income rose 43.9% against 38.8% for pre-tax income, as the effective tax rate fell to 15.1% from 18.1%.

    The detail

    Provision for income taxes was $653.0M on pre-tax income of $4.32B, against $562.5M on $3.11B a year earlier. The filing attributes the lower rate mainly to higher U.S. federal research and development tax credits. Revenue includes foreign exchange effects net of hedging, and the Brazil non-income tax assessments shaped last year's cost of revenues and this year's working capital.1

    AnalysisOur reading: part of the gap between net income growth and operating income growth rests on tax credits and exchange rates, which the company does not set and which need not repeat in the same direction.

Sources

  1. 1.Netflix 10-Q for the period to 2026-09-30 (the filing), Oct 21, 2026, read Nov 2, 2026
Go deeper

Netflix, further in

Member research, then your own questions on ChatGPT.

What could change the outlook

What Netflix's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What has to hold for the margin to keep widening

    Separating the one-time Brazil comparison from the content cost trend, and what amortization, pricing and the advertising build each need to do from here.

  • Why cash trails profit, and what would close the gap

    How the timing of original content payments, working capital and repurchases shapes free cash flow, and which signs in the filing show the gap widening or narrowing.

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Questions to start with
  • How much of Netflix's Q3 FY2026 margin gain came from last year's Brazil tax charge not recurring?
  • Why did Netflix's free cash flow margin slip in Q3 FY2026 while its operating margin rose?
  • What is Netflix building with technology and development spending that grew faster than revenue?

Business Lens describes Netflix from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.