Netflix Beats Third-Quarter Profit Forecast but Shares Slide on Weak Outlook
Netflix reported third-quarter earnings of 87 cents a share, above the 82-cent average forecast, on revenue of about $12.9 billion. But a weak fourth-quarter profit forecast, a cut to its ad-revenue target and persistent investor worries about engagement sent the stock down 5% after hours.
Netflix posted third-quarter earnings of 87 cents a share, ahead of the 82-cent average forecast of analysts, on revenue of about $12.9 billion, up roughly 12% from a year earlier. The results were released after the market closed Tuesday.
Investors did not like what came next. The company issued a fourth-quarter forecast that came in below expectations, and the stock dropped 5% in after-hours trading, according to Barron’s. For the quarter, Netflix forecast net income of $2.79 billion and earnings of 67 cents a share, against average analyst forecasts of $3.07 billion and 73 cents, according to Reuters.
A weaker fourth quarter ahead
For the fourth quarter, Netflix said it expects revenue of $13.4 billion, slightly below Wall Street’s estimate of $13.5 billion, according to Barron’s. The company also projected that operating margin would slide to 26% from 34.6% in the third quarter, citing costs from its recent layoffs, according to FXStreet.
Netflix also cut its 2026 advertising revenue forecast to about $2.7 billion from about $3 billion, executives said in the company’s letter to shareholders, noting that some ad products had rolled out more slowly than expected, according to Reuters.
Investors still worry about engagement
“We know there’s some investor concern about our view hours growth,” the company said in its shareholder letter. “Member response to our 2026 price increases is consistent with prior price changes and our expectations, an indicator that our engagement remains healthy and that we continue to deliver strong value to members.” The company added that it wants to accelerate growth in view hours, according to Barron’s.
One reason for the nerves is competition. Disney+, Amazon Prime and YouTube are all fighting for viewers’ attention, and the newly closed Paramount Skydance-Warner Bros. Discovery merger put the Paramount+ and HBO Max services under one roof, Barron’s noted. The quarter’s revenue growth was the slowest in about three years, according to The Motley Fool. Netflix shares have fallen 27% in 2026, according to Dow Jones Market Data.
A company in reset mode
The earnings arrive days after Netflix laid off about 1,000 employees, roughly 6% of its workforce, and replaced two of its top programming executives, according to Reuters. Earlier this year the company lost its bidding war for Warner Bros. Discovery to the Skydance group led by David Ellison.
Analytics firm Antenna found that Netflix posted monthly subscriber losses in the United States in every month through September. A Netflix spokesperson said the Antenna data were “not representative” of the company’s business performance, according to Reuters.
Reporting based on coverage by Reuters, Barron’s, The Motley Fool and FXStreet.
