Netflix is great at making money – its problem is keeping viewers hooked

Published Wed, Oct 21, 2026 · 09:03 AM

[LOS ANGELES] After a tumultuous week, when Netflix laid off 1,000 employees and fired its chief content officer and top two film executives, the world’s largest streaming service showed that one thing is not in flux: its ability to make boatloads of money.

The company said on Tuesday (Oct 20) that its revenues in the third quarter grew 12 per cent from a year earlier, to nearly US$12.9 billion, in line with Wall Street forecasts, but its lowest quarterly revenue percentage growth in three years. Net income rose 44 per cent, to nearly US$3.7 billion.

For the year, Netflix said, it expects revenue growth to be 13 per cent, roughly in line with its previous estimates. Shares fell nearly 6 per cent to US$64.66 in after-hours trading, with the stock having slipped more than 40 per cent in a year before the earnings report.

The company acknowledged the undercurrent that led to the recent tumult: concern about stagnating attention time on its service.

“We know there’s some investor concern about our view-hours growth”, particularly in the US and Canada, Netflix told investors in a letter. Revenue in those countries grew 11 per cent in the most recent quarter, down from 17 per cent a year earlier.

Better execution needed, co-CEO says

“There is no need for a fundamental shift in the strategy,” Ted Sarandos, a co-CEO of Netflix, added during an investor conference call after the earnings were announced. “We do need better execution in the US.”

At the moment, despite being the most-watched paid streaming service in the world, with 325 million subscribers, the company is not growing fast enough for either its top executives or its shareholders.

The time that viewers spend on the service has stagnated, as YouTube and TikTok have increasingly become competition. Netflix has struggled to create a pipeline of new hits to replace shows such as Stranger Things and Squid Game.

Returning shows such as Beef, The Night Agent and Avatar: The Last Airbender lost significant viewership for their most recent seasons, according to Netflix’s metrics.

And no film released this summer became a breakout hit, a contrast with last summer, when KPop Demon Hunters and Happy Gilmore 2 captivated viewers.

“Netflix has an engagement problem, and that’s a worrying trend going forward,” wrote Jesse Cohen, senior analyst at Investing.com.

Despite all the turmoil, Netflix maintains a loyal following. According to a report released on Tuesday by Antenna, Netflix has the lowest churn numbers, or cancellation rate, of any streamer.

“Back to basics”: Netflix to focus on being must-have service with quality content

Sarandos said in a post-earnings video call that the company “could do better”, adding “now we’ve seen an opportunity to take our slate to the next level”.

But Wall Street analysts have questioned how the company will kick-start growth.

“Netflix remains a well-oiled, highly profitable machine, but focused on too many unwanted distractions,” PP Foresight analyst Paolo Pescatore said. “The company needs to get back to basics and focus on compelling content.”

Sarandos said Netflix plans to focus on its core business of producing quality TV shows and movies to make it a must-have service, and the recent executive shake-up was a step towards that goal.

In its earnings report, Netflix said it would continue to expand its offerings through licensing more third-party content.

For the third quarter, earnings per share came in at US$0.87, ahead of the US$0.82 average forecast of analysts surveyed by LSEG.

New programming during the quarter included Monster: The Lizzie Borden Story, the second season of The Gentlemen, the final installment of Outer Banks and a reboot of Little House on the Prairie.

Alongside last week’s retrenchments of about 6 per cent of its employees, Netflix also cut high profile film and television executives. Notably, it replaced chief creative officer Bela Bajaria and said film chief Dan Lin was departing, signs that it is resetting its programming strategy.

The company named former Disney and Fox executive Peter Rice to replace Bajaria. He also will oversee the film division until a replacement for Lin is chosen.

“Peter Rice understands talent relations, and in a competitive market, creative talent have choices of where they want to work,” Sarandos said on Tuesday. “We want Netflix to always be the place that they love to do the best work of their life.”

Earlier in 2026, Netflix lost a bidding war for Warner Bros Discovery and its rich library of characters, which was sold to David Ellison-led Skydance. Some analysts believe Netflix could go after other acquisition targets such as NBCUniversal after Comcast spins it off.

Netflix has posted monthly subscriber losses in the US throughout 2026, with no net additions reported for any month up to September, data from analytics firm Antenna showed.

Antenna tracks US subscription purchases via sources like credit card transactions, but excludes subscriptions acquired through wholesale bundles. A Netflix spokesperson said the Antenna data were “not representative of Netflix’s business performance”. NYTIMES, REUTERS