Netflix Executives Discuss Q3 Engagement, Advertising and Content Strategy

Netflix (NASDAQ: NFLX ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Netflix reported strong engagement and membership growth in regions like APAC, LATAM, and EMEA, with significant success in India, driving 20% revenue growth. The company emphasized its strategy focused on original, exclusive content along with third-party content to enhance member value, citing deals with Sony, Disney, and Universal. Netflix plans to expand its advertising business and expects continued revenue growth from member growth, pricing, and ads, despite being slightly behind aggressive ad revenue targets this year. Newly appointed Chief Content Officer Peter Rice is anticipated to bolster U.S.

content execution, leveraging his extensive industry experience. The company's future outlook includes a strong content slate, with notable upcoming films and series, alongside expansion into live events and theatrical releases. Management discussed recent headcount reductions focused on efficiency and emphasized strategic investments in high-impact areas. Netflix plans to launch ad tiers in 15 new countries next year and is exploring further third-party content partnerships to broaden its platform value.

Full Transcript Spencer Wong (Vice President, Finance and Capital Markets) Good afternoon and welcome to the Netflix Q3 2026 earnings interview. I'm Spencer Wong, VP of Finance and Capital Markets. Joining me today are Co-CEOs Ted Sarandos and Greg Peters and CFO Spencer Neumann. As a reminder, we will be making forward-looking statements and actual results may vary.

We'll now take questions submitted by the analyst community. Our first question comes from David Joyce of Seaport Research Partners. His question is: Investors are looking for more clarity in what has typically been Netflix's industry-leading strategy. What role do live events or becoming a centralized streaming portal or offering short-form video, third-party or user-generated content play in how you see Netflix regaining a competitive edge?

That can help sentiment. Ted Sarandos (Co-CEO) I'll take that, and thank you, David, for the question. It gives us an opportunity to clarify, obviously, but our strategy is unchanged, and it's always been and it continues to be to combine best-in-class entertainment with industry-leading discovery, global distribution, and the best possible monetization. We want to be the must-have entertainment service, the first one members check for a great series or a great film, and the last service they'd ever cancel.

Now the anchor of that strategy are the Netflix originals—differentiated, exclusive, ambitious, professionally produced series and films and live events. Now we've oriented the market to expect something great and new to watch every week, so we have to deliver on quality and quantity always. And as for the live events, in a world of so much choice, you know, we have titles like K-pop and Wednesday and Bridgerton, and with all those things to choose from, live events like the Canelo-Crawford fight or the eventized sports that we do with the NFL and the MLB, these events break through, you know, and they stand out.

They drive new membership, they add fuel to our ad revenues, they please our existing members, and they just generally enhance the value of Netflix. So we take all of that strategy. We pair that exclusive programming with kind of a broad offering of third-party programming, including second-run titles, deals we just did with Sony, Disney, Universal, and others. In addition to that, we look to new ways to bring third-party content onto the service as well to complement those originals, like we just did with TF1 in France where we're ingesting a full network of programming.

Now, all that said, it's really important to remember roughly 95% of our spend and nearly all of our revenue is focused on that core, where we see a long runway for future growth. Now, other areas that you mentioned, these are early-stage initiatives meant to explore future programming expansions, and we keep our focus and our investment in those areas very tight because the core is the critical growth engine. Great. Spencer Wong (Vice President, Finance and Capital Markets) Thank you, Ted.

Our next question comes from Eric Sheridan of Goldman Sachs. How would you characterize recent engagement trends in the U.S. relative to other geographies? How would you frame any variables such as content, seasonality, competition that might be driving any such divergences in engagement by region?

Greg Peters (Co-CEO) I'll pick up this one and start with just overall engagement, which we think of as the sum total of actual value that we are delivering to members. So this is quality, quantity, and variety of viewing that remains healthy, and it drives our business model. And the best evidence that we've got that we're delivering that value is churn. We've got healthy retention in every region.

Q3 churn, both globally and in the United States, improved year on year, was better than forecast. It's already industry-leading, and the ultimate determinant of are we delivering that value is the reaction to price changes. And those recent price changes that we did, including in the United States, have gone well. We've seen results that are consistent with past changes and our expectations.

And consistent with all that performance, we do plan on delivering our full-year guidance. You talked about sort of specific engagement trends by geography, and as you saw from the letter, we had great results in APAC, LATAM, and EMEA. Our local titles from those regions are driving engagement, and they're driving business growth. And you can see how our business model works here.

We specifically highlighted India, which had a strong slate with a couple titles really, really performing. And as a result, view hours in Q3 in India grew 24% on an absolute basis. They were also up on a per-member basis. All of which drives membership; it drove membership and nearly 20% year-over-year revenue growth.

So that's a great example of how the core model works. We deliver on member value, and we get the business outcomes that we are looking for. Turning to the U.S., our engagement is solid and it will allow us to continue to grow as we have for the last several years. But we know that we can do better, and that better is our upside.

It's our goal to go from very good to great on the performance of that slate. But I just want to note that we are quite excited about what we've got coming. So, coming from the U.S. in Q4, on the series side, we're already off to a great start with limited series East of Eden.

My whole social group is talking about that. We've got season four of The Diplomat, the best season yet of this show, later this quarter. We've got The Body, we've got Murder of JonBenet Ramsey, we've got the final season of Emily in Paris. On the film side, we've got further misadventures of Cliff Booth with Brad Pitt, directed by David Fincher, written by Quentin Tarantino.

You can't ask for a more star-studded lineup than that. We've got Bad Day with Cameron Diaz. And then we've got Steps, which is our new animated film featuring Ali Wong, Stephanie Hsu, and Amanda Seyfried. In addition to all that, we've got our Christmas Day NFL games, and we'll now have the first Thanksgiving Eve game, which we are going to spice up with U2 as the halftime show.

And U2 is just, you know, legendary, one of my favorites. And then moving to 2027, our slate includes Narnia, we've got Charlie and the Chocolate Factory, Here Comes the Flood, Grown Ups 3, fifth season of Bridgerton, third season of Wednesday, Michael Fassbender starring in a new series by the Kennedys, God of Woods, Rabbit Rabbit, just to name a few. We're going to have NFL games—one NFL game in the final week of the regular season. This is the first time we're doing that.

And of course the Women's World Cup in the U.S. and Canada. So there is just a lot to look forward to. Spencer Wong (Vice President, Finance and Capital Markets) Thanks, Greg.

That was an impressive overview of the slate in Q4. I think you may remind me of someone—reminding me of someone—but maybe to build on that, we do have a set of questions building off the theme of engagement to some of the executive changes. This next question comes from Rob Sanderson, Loop Capital. As Netflix is a massive and global content production operation, in what ways can a fresh perspective at the top influence the organization?

What elements of success from his tenure at Disney are you most optimistic that Peter Rice can replicate at Netflix? Are there particular aspects you think the content can perform better under new leadership? Ted Sarandos (Co-CEO) Well, Rob, that's a great question. And first let me start by taking this opportunity to thank Bela Bajaria for all of her incredible contributions to Netflix.

Bela had an incredible decade-long run here. She put a lot of great hits on the board. She led the teams through a lot of expansions of new types of content. She also did the hard work of building this incredible international team who's been making local-for-local content around the world, which has become a great competitive differentiator for us over the last decade.

So I just want to take that moment to thank Bela. I'd also, calling back to that great list you just heard from Greg, there is a lot to be excited about, but I know that we could do better, and we want to build on that momentum. Now, we've seen an opportunity to take our slate to the next level, especially in the U.S., where we can have an outsized impact when we create a big buzzy show that members love and talk about all over the world. Now, I'm incredibly thrilled to have Peter Rice joining as our new Chief Content Officer.

I want to give you some history. I've known Peter for about 15 years, and I've got to tell you, the outpouring of excitement about him coming to Netflix from across the industry and from the creative community has been nothing short of overwhelming. He's one of the really rare people in the industry who's led TV networks, movie studios, streaming services. His creative instinct and his business acumen are remarkable.

He's really an at-scale, quality-and-volume operator, and he does it across every imaginable form of entertainment—network, prestige cable, streaming, theatrical and TV films, and live sports. But most importantly, Rob, Peter Rice understands talent relations. And in a competitive market, creative talent have choices of where they want to work, and we want Netflix to always be the place that they love to do the best work of their life. Peter is the exact right person to lead those efforts in the U.S.

and around the world. Now, that's a key aspect of what I believe Peter can improve on. Looking forward. Spencer Wong (Vice President, Finance and Capital Markets) Thanks, thanks, Ted.

We have a follow-up question that's on the same topic. This comes from Matt Condon of Citizens Bank. With Peter Rice stepping in as Chief Content Officer, what do you see as the biggest opportunities to evolve Netflix's content strategy? His leadership?

Should we anticipate any meaningful changes in the types of content you prioritize, how you allocate content spending, or your overall approach to driving engagement? Or is this more about improving execution within the existing strategy? Ted Sarandos (Co-CEO) Thanks, Matt. Look, our business and our business flywheel are working.

There is no need for a fundamental shift in the strategy. We do need better execution in the U.S. Our content around the world is largely working, as you heard a couple examples there from Greg. But we see titles across Latin America, EMEA, APAC driving engagement, subscriber growth, revenue, and profit.

Now, the U.S. is also working. It's just not growing as fast as it could or as fast as we'd like. So we had some really solid doubles and triples this year.

But the other territories count on some of those titles being home runs so that they'll travel around the world. So we really have got to—we're focusing on that execution. And when we talk about success in APAC, India is a great example. But that success is also happening in Korea and Japan.

And when you look to EMEA, we look to the Nordics, which is a very mature market for us, and that content slate is killing it there. And it's proof that when we have the right focus, make the right choices, and deliver creatively, we can drive outsized impact on the business around the world. Now Peter brings expertise in both art and commerce, television and film. It's kind of that exact balanced skill set that will help guide us through our next chapter.

Now there's a ton to be excited about in our Q4 slate and a ton to be excited about in 2027. And I believe that Peter will actually be able to have an impact on those projects that are in the works even in the short term. So we're very excited to have him join. Spencer Wong (Vice President, Finance and Capital Markets) Thanks, Ted.

The next question comes from Dan Kernos of StoneX. The question is: I wanted to touch on your recent headcount reductions, which is the largest since 2022. I recognize that you may not want to get into specifics, but how should we think about the thinking behind it? Greg Peters (Co-CEO) I can provide some color here.

Going back to: we've got a big and ambitious mission. We aspire to entertain literally the whole world. Now, fulfilling on that big mission requires us to be incredibly disciplined about where we focus, where we invest, how our people work, where our resources go. And when you've driven considerable top-line growth as we have over the last several years, and you're in a highly dynamic market that's constantly changing, I don't think it's unusual then to find that there are some areas that we built quickly and we ended up overinvested in, or there are opportunities to adjust how we are operating to best drive the business through the next stage of growth.

Now, we prefer to make these adjustments organically and iteratively. That's the best way to do it. We think it's our mission basically to constantly be trying to tune and adjust. But sometimes the team needs a forcing function.

The company needs a mandate that requires the whole organization to ask hard questions about where can we be more efficient, where can we make tough decisions about where we can trim or redirect how we're investing. We do not take these decisions lightly. But we also believe we have a responsibility to make hard trade-offs in service of our members, our partners, our employees, our investors, and ultimately our long-term growth. And that was the simple thinking behind it and what motivated recent changes.

Spencer Wong (Vice President, Finance and Capital Markets) Thanks, Greg. Building off of that, our next question comes from Doug Anmuth of J.P. Morgan. Can Netflix increase revenue growth at a double-digit pace in 2027?

What are the key levers to get there and is it sustainable? Spencer Neumann (Group CFO) Spencer, I'll take this one. Gotta contribute a little bit to this call. So Doug, I appreciate the question.

We're delivering strong growth in 2026 to start with, and that's because all three revenue levers that we have, they're working and they're contributing. That's member growth, pricing, and ads. And we expect to deliver strong revenue growth into 2027 as well with those same three levers. And we know there's questions about view hour growth.

We've spoken about that. Greg and Ted talked about it just now. And to be clear, we want to grow view hours faster. We're not satisfied.

We're working on it. But again, as both Greg and Ted articulated, that would be an accelerant to what is already underlying healthy revenue growth. We saw that in India, we just talked about that—strong slate, big bump in view hour growth, nearly 20% revenue growth. And that's just one of those multiple success stories across regions that Ted also mentioned.

But even with modest view hour growth—the modest view hour growth that we're delivering—we're delivering that increasing value to our members across quality, quantity, and variety of viewing with a steady drumbeat of big hits in most regions. And that's really the great thing about our model is that stability of our growth engine. We're not overly dependent on any kind of one title nor kind of outsized performance by any one region to deliver healthy growth. So it's premature to issue full-year 2027 guidance.

We'll do that on our next call, our Q4 call. But our financial objectives are unchanged. We look to sustain double-digit revenue growth, we look to expand margins, and we look to increase free cash flow. Spencer Wong (Vice President, Finance and Capital Markets) Thanks, Spence.

The next question probably falls in your court as well. This one comes from Michael Morris of Guggenheim. The fourth-quarter guidance includes about 120 basis points of cost tied to the headcount reductions. What annual run-rate savings do you expect and how much of that should we assume is reinvested versus supporting operating margin expansion in 2027?

Spencer Neumann (Group CFO) Well, maybe just to make the point again, in terms of specific guidance, we're not going to specifically quantify the expense impact in 2027, but as we did note in our letter, that work—that hard work that Greg walked through, that prioritization—ensures that we can continue to invest aggressively into the highest-impact areas to improve our service, drive innovation, drive growth. So we're really focused on finishing this year strong.