NETFLIX INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding: our core strategy; our ability to improve our content offerings and service; our future financial performance, including expectations regarding revenues, deferred revenue, operating income and margin, net income, expenses, and profitability; liquidity, including the sufficiency of our capital resources, net cash provided by (used in) operating activities, access to financing sources and free cash flows; capital allocation strategies, including any stock repurchases or repurchase programs; seasonality; stock price volatility; impact of foreign exchange rate fluctuations, including on net income, revenues; expectations regarding hedging activity; impact of interest rate fluctuations; adequacy of existing facilities; future regulatory changes and their impact on our business; intellectual property; cybersecurity; price changes and testing; accounting treatment for changes related to content assets; acquisitions; actions by competitors; partnerships; advertising; multi-household usage; reporting of membership-related data; member viewing patterns; dividends; future contractual obligations, including unknown content obligations and timing of payments; our global content and marketing investments, including investments in original programming, consumer products and live experiences; impact of work stoppages; content amortization; resolution of tax examinations; tax expense; unrecognized tax benefits; deferred tax assets; outcome of Brazilian non-income tax matters; payment of deposits relating to Brazilian non-income tax matters; impact of Brazilian non-income taxes; the impact of the One Big Beautiful

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding: our core strategy; our ability to improve our content offerings and service; our future financial performance, including expectations regarding revenues, deferred revenue, operating income and margin, net income, expenses, and profitability; liquidity, including the sufficiency of our capital resources, net cash provided by (used in) operating activities, access to financing sources and free cash flows; capital allocation strategies, including any stock repurchases or repurchase programs; stock price volatility; impact of foreign exchange rate fluctuations, including on net income and revenues; expectations regarding hedging activity; impact of interest rate fluctuations; adequacy of existing facilities; future regulatory changes and their impact on our business; intellectual property; cybersecurity; price changes and testing; accounting treatment for changes related to content assets; acquisitions; actions by competitors; partnerships; advertising; multi-household usage; member viewing patterns; dividends; future contractual obligations, including unknown content obligations and timing of payments; our global content and marketing investments, including investments in original programming, consumer products and experiences; impact of work stoppages; content amortization; resolution of tax examinations; tax expense; unrecognized tax benefits; deferred tax assets; resolution of disputes and other proceedings; our ability to effectively manage change and growth; our company culture; and our ability to attract and retain qualified employees and key personnel. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward- looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on January 23, 2026, in particular the risk factors discussed under the heading “Risk Factors” in Part I, Item 1A.

Previous wording

We are one of the world’s leading entertainment services offering TV series, films and games across a wide variety of genres and languages. Members can play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time.

Current wording

We are one of the world’s leading entertainment services offering TV series, films, games and live programming across a wide variety of genres and languages. Members can play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time.

Previous wording

Operating margin for the three months ended September 30, 2025 decreased by approximately one percentage point as compared to the prior comparative period. The decrease in operating margin was primarily driven by the growth in cost of revenues and sales and marketing expenses outpacing the growth in revenues, partially offset by a slower rate of growth in technology and development expenses and general and administrative expenses relative to revenue growth.

Current wording

Operating margin for the three months ended March 31, 2026 increased by approximately one percentage point as compared to the prior comparative period. The increase in operating margin was primarily driven by revenue growth outpacing the growth in cost of revenues, partially offset by general and administrative, sales and marketing, and technology and development expenses growing at a faster rate relative to revenue growth.

Previous wording

Net income for the three months ended September 30, 2025 increased $183 million as compared to the prior comparative period, primarily due to a $339 million increase in operating income, driven by a $1,686 million increase in revenues and partially offset by a $1,044 million increase in cost of revenues primarily due to the increase in other cost of revenues and content amortization. The impact of higher operating income was partially offset by a $223 million increase in the provision for income taxes.

Current wording

Net income for the three months ended March 31, 2026 increased $2,392 million as compared to the prior comparative period, primarily driven by an increase in interest and other income (expense) due to a $2.8 billion termination fee received in connection with the termination of our agreement with Warner Bros. Discovery, Inc. (“WBD”) to acquire WBD’s streaming and studios businesses, including its film and television studios, HBO Max and HBO (such transaction, the “WBD transaction”). The increase in net income was additionally impacted by a $610 million increase in operating income, driven by a $1,707 million increase in revenues, partially offset by a $625 million increase in cost of revenues due to an increase in content amortization, and a $941 million increase in the provision for income taxes.

Previous wording

We primarily derive revenues from monthly membership fees for services related to streaming content to our members. We offer a variety of streaming membership plans, the price of which varies by country and the features of the plan. As of September 30, 2025, pricing on our plans ranged from the U.S. dollar equivalent of $1 to $35 per month, and pricing on our extra member sub accounts ranged from the U.S. dollar equivalent of $2 to $9 per month. We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.

Current wording

We primarily derive revenues from monthly membership fees for services related to streaming content to our members. We offer a variety of streaming membership plans, the price of which varies by country and the features of the plan. As of March 31, 2026, pricing on our plans ranged from the U.S. dollar equivalent of $1 to $39 per month, and pricing on our extra member sub accounts ranged from the U.S. dollar equivalent of $2 to $10 per month. We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.

Previous wording

We also earn revenues from advertisements presented on our streaming service, consumer products, live experiences and various other sources. Revenues earned from sources other than monthly membership fees were not a material component of revenues for the three and nine months ended September 30, 2025 and September 30, 2024.

Current wording

We also earn revenues from advertisements presented on our streaming service, consumer products and experiences, and various other sources. Revenues earned from sources other than monthly membership fees were not a material component of revenues for the three months ended March 31, 2026 and March 31, 2025.

Previous wording

Revenues for the three and nine months ended September 30, 2025 increased 17% and 15% as compared to the three and nine months ended September 30, 2024, respectively, primarily due to the growth in memberships, price increases, and increased advertising revenue. Additionally, revenues for the nine months ended September 30, 2025 as compared to the same period in 2024 were unfavorably impacted by changes in foreign exchange rates, net of hedging.

Current wording

Revenues for the three months ended March 31, 2026 increased 16% as compared to the three months ended March 31, 2025, primarily due to the growth in memberships, price increases, and increased advertising revenue.

Previous wording

The following tables summarize revenues by region for the three and nine months ended September 30, 2025 and 2024. Total revenues are inclusive of hedging gains (losses) of $(129) million and $(2) million for the three and nine months ended September 30, 2025, respectively, and $48 million and $70 million for the three and nine months ended September 30, 2024, respectively. See Note 7 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

Current wording

The following table summarizes revenues by region for the three months ended March 31, 2026 and 2025. Total revenues are inclusive of hedging gains (losses) of $(133) million and $165 million for the three months ended March 31, 2026 and 2025, respectively. See Note 8 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

Previous wording

The tables below summarize constant currency revenues by region for the three and nine months ended September 30, 2025 and the constant currency percentage change in revenues by region for the three and nine months ended September 30, 2025 as compared to the three and nine months ended September 30, 2024:

Current wording

The table below summarizes constant currency revenues by region for the three months ended March 31, 2026 and the constant currency percentage change in revenues by region for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025:

Previous wording

Expenses related to the acquisition, licensing and production of content not included in content amortization may include payroll, stock-based compensation, facilities, and other personnel-related expenses, costs associated with obtaining rights to music included in our content, overall deals with talent, miscellaneous production-related costs and participations and residuals. Streaming delivery costs are primarily related to our global content delivery network (“Open Connect”). We have built our own Open Connect network to help us efficiently stream a high volume of content to our members over the internet. Delivery expenses, therefore, include equipment costs related to Open Connect, payroll and related personnel expenses and all third-party costs, such as cloud computing costs, associated with delivering content over the internet. Other operating costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs directly incurred in making our content available to members.

Current wording

Expenses related to the acquisition, licensing and production of content not included in content amortization may include payroll, stock-based compensation, facilities, and other personnel-related expenses, costs associated with obtaining rights to music included in our content, overall deals with talent, miscellaneous production-related costs and participations and residuals. Streaming delivery costs are primarily related to our global content delivery network (“Open Connect”). We have built our own Open Connect network to help us efficiently stream a high volume of content to our members over the internet. Delivery expenses, therefore, include equipment costs related to Open Connect, payroll and related personnel expenses and all third-party costs, such as cloud computing costs, associated with delivering content over the internet. Other operating costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs incurred in making our content available to members.

Previous wording

The increase in cost of revenues was primarily due to an increase in other cost of revenues, driven primarily by the accrual of a loss of $619 million related to non-income tax assessments in Brazil, coupled with a $303 million increase in content amortization relating to our existing and new content. We do not expect that non-income taxes incurred in Brazil will materially impact our results of operations in future periods. See Note 8 Commitments and Contingencies in the accompanying notes to our consolidated financial statements for further detail on our non-income tax matters.

Current wording

The increase in cost of revenues was primarily due to a $395 million increase in content amortization relating to our existing and new content. No individual component of the remaining increase in cost of revenues was material.

Previous wording

The increase in sales and marketing expenses was primarily driven by a $104 million increase in marketing expenses, coupled with a $41 million increase in personnel-related costs due to the growth in advertising sales headcount.

Current wording

The increase in sales and marketing expenses was primarily driven by a $113 million increase in marketing expenses, coupled with a $48 million increase in personnel-related costs, primarily due to the growth in advertising sales headcount.

Previous wording

The increase in technology and development expenses was primarily due to a $110 million increase in personnel-related costs.

Current wording

The increase in technology and development expenses was primarily due to a $105 million increase in personnel-related costs.

Previous wording

The increase in general and administrative expenses was primarily due to a $20 million increase in personnel-related costs and a $10 million increase in third-party expenses.

Current wording

The increase in general and administrative expenses was primarily due to an $88 million increase in third-party expenses, driven by higher legal fees and transaction-related costs, including those associated with the WBD transaction. General and administrative expenses also increased due to a $79 million increase in personnel-related costs.

Previous wording

Interest expense consists primarily of the interest associated with our outstanding debt obligations, including the amortization of debt issuance costs. See Note 6 Debt in the accompanying notes to our consolidated financial statements for further detail on our debt obligations.

Current wording

Interest expense consists primarily of the interest associated with our outstanding debt obligations and the amortization of debt issuance costs. See Note 7 Debt in the accompanying notes to our consolidated financial statements for further detail on our debt obligations.

Previous wording

Interest and other income (expense) consists primarily of foreign exchange gains and losses on foreign currency denominated balances, gains and losses on certain derivative instruments, and interest earned on cash, cash equivalents and short-term investments.

Current wording

Interest and other income (expense) consists primarily of foreign exchange gains and losses on foreign currency denominated balances, gains and losses on certain derivative instruments, interest earned on cash, cash equivalents and short-term investments, and miscellaneous other income and expenses.

Previous wording

The increase in the effective tax rates for the three and nine months ended September 30, 2025, as compared to the same periods in 2024, was primarily due to a decrease in tax benefits associated with federal research and development tax credits, as well as the lower growth in the foreign-derived intangible income deduction relative to the growth in income before income taxes.

Current wording

The increase in the effective tax rate for the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to a decrease in tax benefits associated with lower excess tax benefits on stock-based compensation as well as lower foreign-derived income deduction relative to the growth in income before income taxes.

Previous wording

Debt, net of debt issuance costs and discounts, decreased $1,120 million primarily due to approximately $1,833 million in repayments of debt, partially offset by the remeasurement of our euro-denominated notes in the nine months ended September 30, 2025. The amount of principal and interest on our outstanding notes due in the next twelve months is $690 million. As of September 30, 2025, no amounts had been borrowed under the $3 billion Revolving Credit Agreement or the $3 billion Commercial Paper Program. See Note 6 Debt in the accompanying notes to our consolidated financial statements.

Current wording

Debt, net of debt issuance costs and discounts, decreased $102 million primarily due to the remeasurement of our Euro-denominated notes in the three months ended March 31, 2026. The amount of principal and interest on our outstanding notes due in the next twelve months is $1,686 million. See Note 7 Debt in the accompanying notes to our consolidated financial statements.

Previous wording

Our primary uses of cash include the acquisition, licensing and production of content, marketing programs, streaming delivery, and personnel-related costs. Cash payment terms for non-original content have historically been in line with the amortization period. Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content. For example, production costs are paid as the content is created, well in advance of when the content is available on the service and amortized. We expect to continue to significantly invest in global content, particularly in original content, which will impact our liquidity. Our other uses of cash include strategic acquisitions and investments, as well as share repurchases. We currently anticipate that cash flows from operations, available funds and access to financing sources, including our Revolving Credit Facility and Commercial Paper Program, will continue to be sufficient to meet our cash needs for the next twelve months and beyond.

Current wording

Our primary uses of cash include the acquisition, licensing and production of content, marketing programs, streaming delivery, and personnel-related costs. Cash payment terms for non-original content have historically been in line with the amortization period. Investments in original content, and in particular content that we produce and own, require more cash upfront relative to licensed content. For example, production costs are paid as the content is created, well in advance of when the content is available on the service and amortized. We expect to continue to significantly invest in global content, particularly in original content, which will impact our liquidity. Our other uses of cash include strategic acquisitions and investments, as well as share repurchases.

Previous wording

In September 2023, the Board of Directors authorized the repurchase of up to $10 billion of our common stock, with no expiration date, and in December 2024, the Board of Directors increased the share repurchase authorization by an additional $15 billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may discontinue any repurchases of our common stock at any time without prior notice. During the nine months ended September 30, 2025, the Company repurchased 6,765,397 shares of common stock for an aggregate amount of $7.0 billion (excluding the 1% excise tax on stock repurchases as a result of the Inflation Reduction Act of 2022). As of September 30, 2025, $10.1 billion remains available for repurchases.

Current wording

In September 2023, the Board of Directors authorized the repurchase of up to $10 billion of our common stock, with no expiration date, and in December 2024, the Board of Directors increased the share repurchase authorization by an additional $15 billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may discontinue any repurchases of our common stock at any time without prior notice. During the three months ended March 31, 2026, the Company repurchased 13,497,098 shares of common stock for an aggregate amount of $1.3 billion. As of March 31, 2026, $6.8 billion remains available for repurchases.

Previous wording

(1)As of September 30, 2025, content obligations were comprised of $4.1 billion included in “Current content liabilities” and $1.6 billion of “Non-current content liabilities” on the Consolidated Balance Sheets and $15.2 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition.

Current wording

(1)As of March 31, 2026, content obligations were comprised of $4.1 billion included in “Current content liabilities” and $1.6 billion of “Non-current content liabilities” on the Consolidated Balance Sheets and $18.5 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition.

Previous wording

Net cash provided by operating activities for the three months ended September 30, 2025 increased $504 million as compared to the corresponding period in 2024, primarily driven by a $454 million increase in adjustments for non-cash expenses, $396 million in favorable changes in working capital, and a $183 million or 8% increase in net income, partially offset by a $530 million increase in payments for content assets.

Current wording

Net cash provided by operating activities for the three months ended March 31, 2026 increased $2,501 million as compared to the corresponding period in 2025, primarily driven by a $2,392 million or 83% increase in net income which was largely attributable to an increase in interest and other income (expense) due to a $2.8 billion termination fee received in connection with the termination of the WBD transaction, a $749 million increase in adjustments for non-cash expenses, and $200 million in favorable changes in working capital, partially offset by an $841 million increase in payments for content assets. Changes in working capital includes $729 million of non-routine payments made during the current period in connection with non-income tax assessments in Brazil for prior tax periods, which were offset by favorable changes in other working capital balances.

Previous wording

Net cash provided by (used in) investing activities for the three months ended September 30, 2025 increased $1,913 million as compared to the corresponding period in 2024, primarily due to net cash inflows of $172 million from maturities, sales and purchases of investments in the three months ended September 30, 2025 as compared to cash outflows of $1,742 million from purchases of investments in the corresponding period in 2024, partially offset by a $38 million increase in purchases of property and equipment.

Current wording

Net cash used in investing activities for the three months ended March 31, 2026 increased $1,268 million as compared to the corresponding period in 2025, primarily due to a net decrease of $614 million in cash flows from maturities, sales and purchases of investments, coupled with net cash outflows for acquisitions for an aggregate amount of $586 million in the three months ended March 31, 2026, as compared to no acquisition-related cash flows in the corresponding period in 2025. In addition, purchases of property and equipment increased $68 million in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Previous wording

Net cash provided by (used in) financing activities for the three months ended September 30, 2025 decreased $1,964 million as compared to the corresponding period in 2024, primarily due to no proceeds from the issuance of debt in the three months ended September 30, 2025, as compared to proceeds from the issuance of debt of $1,794 million in the corresponding period in 2024, coupled with a $157 million decrease in cash flows related to higher repurchases of common stock in the three months ended September 30, 2025 as compared to the corresponding period in 2024.

Current wording

Net cash used in financing activities for the three months ended March 31, 2026 decreased $2,798 million as compared to the corresponding period in 2025, primarily driven by a $2,266 million decrease in repurchases of common stock, coupled with no repayments of debt in the three months ended March 31, 2026, as compared to $800 million in repayments of debt in the corresponding period in 2025. In addition, proceeds from the issuance of common stock decreased $302 million in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.