Netflix (NFLX) closed its trading session on Tuesday at $68.69, down 1.66%. The stock took a further hit in after-hours trading, plummeting approximately 6% to $64.69 following the release of its latest earnings report.
The streaming giant reported a third-quarter earnings per share (EPS) of 87 cents, surpassing analysts’ expectations of 82 cents. Revenue for the quarter was $12.87 billion, matching forecasts. However, investors were quick to react negatively to the company’s outlook for the fourth quarter, which fell short of expectations.
While revenue increased nearly 12% year-over-year, attributed to membership growth and a price increase implemented in March, the fourth-quarter guidance provided by Netflix was a cause for concern. The company anticipates a revenue of $13.44 billion, which is below the consensus estimate of $13.51 billion.
In addition to the disappointing revenue projections, Netflix revised its 2026 revenue forecast downwards to $51.1 billion, which is at the lower end of its previous range of $51 billion to $51.4 billion. Wall Street had expected the figure to be around $51.2 billion, making the new estimate feel like a letdown.
Furthermore, Netflix announced a significant cut to its 2026 ad revenue forecast, reducing it from roughly $3 billion to about $2.7 billion. The company cited a slower rollout of some advertising capabilities as a contributing factor to this downgrade.
Co-CEO Greg Peters acknowledged the challenges, stating that the ad build-out is progressing quickly but admitted that Netflix is “a bit behind our aggressive target for the year.”
Geetha Ranganathan, a senior media analyst at Bloomberg Intelligence, suggested that the lowered outlook indicates a slowing growth trajectory, which could spell trouble for the company moving forward.
Engagement Levels and Workforce Reductions
In its shareholder letter, Netflix addressed concerns regarding viewer engagement, asserting that it remains healthy despite investor apprehension about growth in viewing hours. Peters emphasized that engagement in the U.S. is solid, expressing a commitment to elevate performance from “very good to great.”
However, the company also revealed plans to cut approximately 6% of its workforce, translating to roughly 1,000 jobs, marking the largest reduction since 2022. This decision is expected to impact the fourth-quarter operating margin by about 120 basis points. Notably, Chief Content Officer Bela Bajaria will be leaving her position, with former Disney executive Peter Rice stepping in.
As it stands, Netflix’s stock is down about 48% from its record high reached in June 2025 and has fallen roughly 25% year-to-date. Following the earnings report, the stock was trading at $64.69, reflecting a 5.82% decrease in after-hours trading.
