Netflix posts third-quarter earnings beat, but shares fall on advertising and revenue guidance
Wall Street and investors will be looking for Netflix to provide additional details about the company's strategy following recent organizational changes
Here's how Netflix performed for the period ended Sept. 30, compared with projections from analysts polled by LSEG:
Net income for the quarter was $3.66 billion, or 87 cents per share, compared with $2.55 billion, or 59 cents a share in the same period last year. Netflix said the year-over-year jump in profit was due in part to the timing of expenses.
The company expects fourth-quarter revenue to rise more than 11% to $13.44 billion, driven by growth in memberships, pricing and ad revenue, it said.
The company narrowed its 2026 full-year forecast, saying it now expects revenue to reach $51.1 billion, a 13% increase over the year prior. This is on the low end of the range Netflix provided during its previous earnings report of between $51 billion and $51.4 billion and below Wall Street's expectations of $51.2 billion for the year, according to LSEG.
Shares of Netflix fell about 4% in extended trading Tuesday.
Wall Street and investors will be looking for Netflix to provide additional details about the company's strategy following recent organizational changes and headwinds including stagnating viewership and growing competition from the likes of YouTube.
"With intense competition and an explosion of content competing for consumer attention, strategic clarity and excellent execution are critical," the company said in a shareholder letter Tuesday. "In Q3, we delivered well across all three priorities, but we see room to do even better with focused, continuous improvement."
Last week, Netflix said it was laying off about 6% of employees, or roughly 1,000 workers, and that Chief Content Officer Bela Bajaria was departing from that role.
The company said Tuesday it expects its fourth-quarter results to be impacted by those headcount reductions, with a negative impact on operating margin of about 120 basis points.
Former Disney executive Peter Rice has been tapped as the new CCO, but it's not yet clear how he'll address concerns around viewership.
Netflix in its shareholder letter said, "We know there's some investor concern about our view hours growth," but added, "engagement, which encompasses quantity, quality and variety of viewing, remains healthy and … we continue to deliver strong value to members."
The company seeks to accelerate growth in those view hours and plans to do so with a three-step strategy, it said: deliver more entertainment value to members; leverage technology to improve all aspects of the service; and improve monetization.
Central to Netflix's value offering has been its cheaper, ad-supported tier. Yet, the company on Tuesday lowered its full-year revenue guidance for its ad business.
Netflix said it now expects 2026 ad revenue of around $2.7 billion, down from the roughly $3 billion the company had previously forecast. That lower guidance is due to a slower-than-expected rollout of some ad product capabilities, the company said.
