Shares of Netflix hit a two-year low after the streamer’s Q3 2026 earnings report revealed an ongoing softening in top-line growth and a miss on advertising revenue for the full year.
The stock was down -7% in premarket trading Wednesday, to under $64/share, the lowest point since August 2024. Netflix’s Q4 revenue guidance was slightly below Wall Street expectations, and the company said ad sales for 2026 are now expected to be $2.7 billion, $300 million lighter than previously forecast, because of the slower-than-expected rollout of “some ad product capabilities.”
So how does Netflix recharge audience engagement (and thus keep revenue pointed up) after a drop-off in viewing, particularly in the U.S.?
To Netflix co-CEO Ted Sarandos, the answer is better execution on its core model — that the company needs to crank up its buffet of buzzy, must-watch TV shows and movies. Last week he dismissed content chief Bela Bajaria, who’s being replaced by Peter Rice, as part of a larger overhaul of content leadership. On the Q3 earnings call, Sarandos praised Bajaria but said “I know that we could do better.”
Ahead of its Q3 earnings, Netflix also laid off 1,000 workers, 6% of its headcount, which execs have framed as giving it the ability to invest more in growth areas.
But some on Wall Street believe Netflix needs to do more than try to churn out TV and movie hits — that it needs a strategy to capture viewing of mobile and short-form video content, which is being soaked up by platforms like YouTube, TikTok and Instagram.
“[W[e think the Street should remain skeptical of a long-term strategy that simply sees NFLX double down on its legacy core strength (premium TV, films, and increasingly, live events), while NFLX remains largely absent from the fastest areas video entertainment growth (e.g., mobile, short-form),” New Street Research analyst Dan Salmon wrote in an Oct. 20 research note.
YouTube continues to make significant viewing share gains with an “all content types, all formats” approach on connected TV, Salmon wrote. While adopting a straight user-generated content approach doesn’t make sense for Netflix, “we believe bold thinking is increasingly needed to address these long-term threats to NFLX mindshare with younger audiences.”
Pivotal Research Group’s Jeff Wlodarczak similarly cited concerns for Netflix that short-form entertainment “is doing to streaming what streaming has done to traditional Pay TV,” as younger consumers spend an ever-increasing amount of time on social media platforms. Following Netflix’s Q3 earnings report, Wlodarczak reduced its subscriber forecasts and increased programming cost forecasts which led to a $5 reduction in its year-end 2026 target price on the stock to $65.
Meanwhile, Netflix once touted the addition of videogames as an extension of its core service as a promising growth driver — but games weren’t mentioned at all in its Q3 earnings, except to note that the streamer teamed up with Take-Two Interactive to unveil a sneak peek in August of highly anticipated title “Grand Theft Auto VI.”
But all of that said, with over 325 million global subscribers, Netflix remains well positioned to keep its core streaming business humming along nicely, albeit at a somewhat less rapid clip, according to MoffettNathanson analyst Robert Fishman.
“We continue to believe Netflix has significant headspace to push monetization of its leading SVOD scale, which should lead to compounding profits for years to come,” Fishman wrote in a research note. MoffettNathanson forecasts Netflix earnings per share to reach $3.85 in 2027 (down from $4.00 previously), growing by 21% in 2028 to $4.65 (vs. $4.80 previously). The analyst reiterated a “buy” rating on Netflix stock but lowered his 12-month price target by $10 to $90/share.
Also bullish on the long-term strategy was Wedbush Securities analyst Alicia Reese, who wrote in a note that “the details suggest Netflix isn’t beholden to industry headwinds; it is in control.” She noted, “Churn and pricing held up, ad demand is intact, Netflix is expanding its valuable live-events inventory, and it plans to preserve its content strategy rather than duking it out with YouTube on short-form.”
“Importantly, management’s tone underscored its intent to shift toward a platform model as it broadens its licensing partnerships and add-on deals, in addition to reaccelerating its ad rollout,” Reese wrote. Because there Netflix still has “significant potential” to expand ad revenue, Wedbush analysts reiterated their “outperform” rating on Netflix but lowered price target on the stock from $90 to $80/share.