Shares of struggling Netflix fell after hours Tuesday as the company issued a worrying drop in its forecasts for fourth-quarter revenue and full-year ad sales.
This collapse, which partially reversed as the full results were digested, occurred despite strong third-quarter financial data. Earnings per share of 87 cents beat Wall Street expectations, compared with 59 cents for the same period in 2025. Revenue of $12.87 billion, up 12% year over year, matched the Street estimate.
Revenue guidance of $13.4 billion for the fourth quarter 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 expected to reach $2.7 billion for 2026, up from the previously forecast $3 billion. In its quarterly letter to shareholders, the company blamed the reduction on “slightly slower than expected rollout of certain advertising product features.”
These results follow last week’s layoffs, the company’s deepest reductions since 2022, as well as the ousting of high-level executives, including content chief Bela Bajaria. Co-CEO Ted Sarandos recently told a conference that Netflix viewership hasn’t grown “as fast as I would like,” and that the management overhaul is perhaps a prelude to bigger strategic changes as the company charts a new path.
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“We know that investors are concerned about the growth in our viewing hours,” the letter to shareholders said. “Member response to our price increases for 2026 is consistent with past 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 are also looking to accelerate growth in viewing hours.”
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The letter lists a number of notable originals outside the United States, noting that non-English listening has grown from less than 10% of total listening to more than a third today. The name-checked series included Plastic beauty, The secret woman And The perfect liewhich are on track to become the most watched titles of all time in Japan, Denmark and the Netherlands, respectively. Facing El Chapo is poised to become the No. 2 Mexican title among the service’s 325 million subscribers worldwide.
In the United States, however, the company has moved sideways as its competitors have managed more impressive series in 2026. Alongside its main linear and streaming rivals, Netflix has been frustrated by YouTube, which has been the No. 1 streaming destination for three years in a row.
Netflix has already gone through difficult times throughout its existence. When she turned on her website as a startup, the servers went down. After successfully growing its DVD rental business, in 2011 the company proposed spinning it off into a separate company called Qwikster, a plan that sank the stock and was usurped. Saturday evening live. And in 2022, Netflix’s Great Correction saw the company move into advertising after years of denying it, in order to counter the narrative about then-stagnant subscriber growth.
Right now, several factors have combined to send the stock down 40% over the past year. Chief among them is the slowdown in audience growth of late, a trend that led to Bajaria being replaced last week by Peter Rice.
Another lingering shock is his decision to enter the high-stakes race for Warner Bros, whose top executives have sparked skepticism by declaring a “nice to have, not necessary” asset. After striking a deal to acquire Warner’s studios and streaming division last December in its largest-ever M&A deal, the deal was ultimately unsealed by Paramount, which offered $110 billion for all of Warner Bros. Discovery.
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