Battered Netflix shares tumbled in after-hours trading Tuesday as the company issued a worrisome decrease in guidance for fourth-quarter revenue and full-year advertising sales.
The swoon, which was partially reversed as the full results were digested, came despite a solid set of financials for the third quarter. Earnings per share of 87 cents beating Wall Street expectations and rising from 59 cents in the same period of 2025. Revenue of $12.87 billion, up 12% year-over-year, matched the Street estimate.
The guidance for fourth-quarter revenue of $13.4 billion was reduced due to the timing of expenses, including those related to the recent layoff of about 1,000 workers, or 6% of total staff. Advertising revenue is now projected to be $2.7 billion for 2026, compared with earlier forecasts for $3 billion. In its quarterly letter to shareholders, the company blamed the reduction on “slightly slower than expected rollout of some ad product capabilities.”
The results come on the heels of last week’s layoffs, the company’s deepest cuts since 2022, as well as the ouster of high-level executives including content chief Bela Bajaria. Co-CEO Ted Sarandos recently said at a conference that viewership on Netflix hasn’t been growing “as fast as I want,” and the executive overhaul is perhaps a prelude to larger strategic changes as the company plots a new course.
“We know there’s some investor concern about our view hours growth,” the shareholder letter said. “Member response to our 2026 price increases is consistent with prior price changes and our expectations, an indicator that our engagement – which encompasses quantity, quality and variety of viewing – remains healthy and that we continue to deliver strong value to members. But we do seek to accelerate growth in view hours as well.”
The letter listed a number of notable originals from outside the U.S., noting that non-English viewing has grown from less than 10% of total viewing to more than one-third today. The name-checked series included Plastic Beauty, The Secret Woman and The Perfect Lie, which are on track to become the most-watched titles ever in Japan, Denmark and the Netherlands, respectably. Facing El Chapo is on course to be the No. 2 Mexican title across the global service’s 325 million subscribers.
In the U.S., however, the company has been moving sideways as competitors have managed more impressive runs in 2026. Along with its main linear and streaming rivals, Netflix has been frustrated by YouTube, which has been the No. 1 destination in streaming for three years running.
Netflix has faced trying times before over its entire existence. When it lit up its website as a startup company, the servers crashed. After successfully scaling its DVD rental business, in 2011 it proposed spinning it out into a separate company called Qwikster, a scheme that tanked the stock and got spoofed on Saturday Night Live. And in 2022, the great Netflix correction saw the company jump into advertising after years of denying it would as a way to counteract the narrative about its then-stagnating subscriber growth.
In the current moment, there are a few factors that have combined to send the stock down 40% over the past year. Chief among them is its slowing viewership growth of late, a trend that prompted last week’s replacement of Bajaria with Peter Rice.
Another is the lingering shock of its decision to enter the high-stakes chase for Warner Bros, which top execs drew skepticism by declaring a “‘nice-to-have, not a need-to-have'” asset. After clinching a deal to acquire Warner’s studio-and-streaming division last December in by far its biggest ever M&A deal, it ultimately was dislodged by Paramount, which offered $110 billion for all of Warner Bros. Discovery.