Netflix fell after cutting 2026 ads to $2.7 billion, but Q3 grew 11.8% with a 34.6% margin. I see 15% upside to $74.60 on steady growth and buybacks.
Key points
- $12.9 billion Q3 revenue in 2026 grew 11.8 percent from last year with a 34.6 percent margin in 2026.
- $2.7 billion 2026 ad goal in 2026, cut on product delays, still grows over 80 percent in 2026.
- $22.3 billion buyback room in 2026 remains after $4.8 billion repurchased in Q3 2026.
The call
The market now expects stalling growth. At $64.61 a share today the price implies about $2.94 of profit a share next year on my multiple. That sits well below the $3.39 a share next year I model on steady growth.
Quarterly revenue in billions of dollars- Reported revenue
- My forecast
SEC filings through Q2 FY26 and Oct 20 8-K for Q3; Q4 is company guide.
I expect steady compounding to win. I see revenue near $56.5 billion next year on double digit growth next year. Profit per dollar of sales, or margin, near 32 percent next year with buybacks then drives $3.39 of profit a share next year.
Valuation
| Driver | Estimate |
|---|
| FY27 revenue | $56.5 billion |
| FY27 operating margin | 32.0% |
| FY27 earnings per share | $3.39 a share |
| Multiple | 22 times |
| Target | $74.60 a share |
The 22 times multiple, or price paid per dollar of profit, fits a cash rich leader. Free cash flow yield, or cash after bills as a share of value, of 4.5 percent in 2026 supports it. Upside of 15 percent to target gives a buy.
Ad revenue still small but growing fast ($ billions)- Ad revenue
- All other revenue
Company guides and my arithmetic; FY26 ad goal cut to $2.7B on Oct 20.
Risks
- Ads stay delayed and 2027 ads miss, which you would see in a soft January 2027 guide for 2027.
- Price rises lift cancellations and United States growth stalls, which you would see in weak United States revenue in Q4 2026.
- Content and layoff costs run high and margin falls, which you would see in Q4 2026 margin below 26 percent.
What would change my mind
I would turn cautious if revenue growth next year stays below 9 percent for two quarters while margin falls.