Earnings Digest

#SPOT Q3 2026 earnings review: subscribers and gross margin deliver, opex eats the gain Revenue of €4.97B (+16% YoY, +14% in constant currency), in line with the ~€4.98B consensus. Diluted EPS of €2.48 versus ~€2.8 expected and €3.28 a year ago. Growth comes from Premium: 306M subscribers (+9%) and ARPU of €4.95 (+7.5% in constant currency), mostly from price increases. Strengths • Subscribers beat: 6M net adds, 1M above guidance. MAUs +11% to 788M, with growth in every region. • Record Q3 gross margin of 33.0% (+136bp); Premium 34.5% (+130bp) as revenue outpaces royalties. Q4 guided at 33.8%. • Ads are recovering: +9% in constant currency versus +3% in each of Q1 and Q2, led by automated channels (+€91M). • Q4 guidance: +10M subscribers to 316M, revenue of €5.2B (+15%), operating income of €820M (+17%). • Balance sheet: €9.9B of cash and short-term investments, no debt beyond leases after €1.3B of exchangeable notes were repaid in March. • Headcount flat at 7,284 by management's account; LTM free cash flow of €3.2B. Weaknesses • No operating leverage: operating margin 13.5% versus 13.6%, operating income +15% (+12% in constant currency) against gross profit +21%. Opex +26%, R&D +35% (cloud and AI +€58M). • Social charges swung from a €16M credit to a €22M cost (€13M above forecast) on the share price. Without them the margin is 14.0% versus 13.2%. • Net income −42% to €518M is a base effect: Q3'25 had a €202M US tax benefit (Section 174) and a €197M fair-value gain on the exchangeable notes. The tax rate is 26.5% versus −8.7%. • Free cash flow −9% to €735M on working capital; cash taxes of €75M versus €5M. • Ad quality: the direct channel lost €53M on fewer music impressions and music ad pricing is soft. Ads are 10% of revenue at an 18.7% gross margin. • ARPU growth slows to +4.5–5% in Q4 as Spotify laps price increases in 150+ markets; product and market mix already took €0.14 off ARPU in Q3. • Buybacks only offset dilution: $1.1B year to date, ~1.5% of shares since August 2025. No 2027 guidance and no comment on label renewals. Bottom line The subscription engine works: more payers, higher prices, a wider gross margin. But the gain goes to marketing, cloud and AI, and the operating margin is flat YoY. Q4 guidance implies ~15.8% versus 15.5% a year ago. The key question is whether opex growth really peaked in Q3, as management says. #SPOT #earnings #Q3_2026 #Streaming

#NFLX Q3 2026 earnings review: the margin is real, the growth is slowing Revenue of $12.87B (+12% YoY, +11% FX-neutral), in line with consensus and the company's own forecast. EPS of $0.87 versus ~$0.82 expected. Growth comes mostly from subscriptions (+$1.06B YoY: more members and higher prices); ads added +$256M. Strengths • Content leverage: amortization +6% to $4.24B against +12% revenue, down to 33% of revenue from 35%. • Operating margin of 34.6% versus 28.2%, ahead of forecast. 2026 guided at 31.5% versus 29.5% in 2025. • Retention: churn improved YoY globally and in the US and beat forecast; the 2026 price increases landed as expected. • Free cash flow of $2.9B (+8%), operating cash flow of $3.2B. • Record buyback: 63.9M shares for $4.8B; diluted shares −3.3% YoY to 4.20B, $22.3B of authorization left. • India shows the playbook works: view hours +24%, revenue ~+18% FX-neutral, record paid net adds. Weaknesses • Growth is decelerating: +17.2% a year ago, +11.8% now, +11.5% guided for Q4. FX-neutral EMEA +9% (from +15%), LATAM +12% (from +20%). • Ads behind plan: 2026 ad revenue cut to ~$2.7B from ~$3B on a slower rollout of ad products. Management says ads still grow ~80% this year. • Operating income +37% to $4.5B is mostly a base effect: Q3'25 carried a $619M Brazil non-income tax charge. Without it, operating income grew ~15% and the margin rose ~1 point (33.6% to 34.6%), helped by expense timing. • Weak Q4: EPS guided at $0.67 versus ~$0.73 consensus, margin 26.0% including ~120bp (~$160M) for the largest layoffs since 2022. • Engagement: no global view-hours figure, while management acknowledges investor concern about view-hours growth. • Buybacks outrun cash generation: $4.8B against $2.9B of FCF. Cash fell $0.9B in the quarter, a $1B bond refinances a Q4 maturity, and 2026 FCF was trimmed to ~$12.0B from $12.5B. • Cash content spend ahead of amortization: $5.16B versus $4.24B (1.22x; 1.17x year to date against ~1.1x guided). Tech and development +21%, stock-based pay +65%. Bottom line A profitable business with pricing power, but the story is shifting from growth to margins and buybacks. The headline beat flatters: the profit jump rests on a 2025 tax charge, while revenue growth, ads and engagement all point down. The key question is the 2027 outlook, due in January: can ads, launching in 15 more countries, re-accelerate growth? #NFLX #earnings #Q3_2026 #BigTech

#META Q3 2026 earnings review: ads are booming, the cash goes to AI Revenue of $64.6B (+26% YoY) against a ~$63.3B consensus. EPS of $3.83 versus ~$3.57 expected. The growth is high quality: ad impressions +10%, average price per ad +14%, so AI targeting is raising returns on ads, not just reach. Strengths • The core is in shape: Family of Apps brought in $64.2B, with 3.64B daily active people (+3%). • New revenue streams: other revenue +59% to $1.1B (WhatsApp paid messaging and subscriptions), and partnership ads reached a $15B annual run rate. • Muse: 10M users in the US and Canada in ~6 weeks, about a quarter of them daily. What holds back a wider launch is compute, not demand. • Q4 guidance: $73–76B in revenue. • Headcount of 66.8K, down 15% YoY. • Reality Labs losses are shrinking: $4.1B versus $4.4B, with ~$15B expected for 2027 versus $18–19B in 2026. Weaknesses • Expenses +68% to $51.6B, operating margin down from 40% to 20%, operating income −37% to $13B. The main cause is a $9.9B charge for the agreement with 52 state attorneys general over social media harm to teens. But even without it, operating income grew only 11% at a ~35% margin: AI infrastructure is eating the operating leverage. • Free cash flow of −$2.1B versus +$10.6B a year ago. Capex of $34.9B for the quarter and $135–145B for the year. • Debt pays for the build-out: $24.9B borrowed in nine months, $80.9B of long-term debt. No buybacks in 2026 (versus $3.3B a quarter a year ago). • The legal risk is not over: payments under the agreement could reach ~$18.6B, and more child-safety trials lie ahead. • Net income +264% to $9.9B is a base effect, not real growth: a year ago there was a one-time tax charge, with an 87% tax rate. • Reality Labs revenue −6% to $443M. • No 2027 capex figure, only a promise to "invest aggressively". The new non-voting Class C shares (effectively a 2-for-1 split) are meant in part for raising capital and deals, a dilution risk. Bottom line The ad business is stronger than it has been in years, but Meta is turning from a cash machine into a capital-intensive AI company running on borrowed money. The whole report is a bet that Muse and AI ads will pay back ~$140B of capex a year. The key question is the 2027 budget, due in the January report. #earnings #Q3_2026 #BigTech