Netflix (NFLX) stock fell 5% after hours Tuesday as the streaming giant’s fourth-quarter revenue outlook fell short of Wall Street estimates, signaling slowing growth.
The company reported revenue of $12.87 billion during its fiscal third quarter, in line with analyst estimates. Earnings per share came in at $0.87, beating estimates of $0.82.
The company’s fourth-quarter revenue outlook, however, stands at $13.44 billion, below analysts’ consensus expectations of $13.51 billion.
Wall Street has been laser-focused on measuring engagement, which represents how much time viewers spend watching and wasting.
As for the United States, “our commitment is strong and it will allow us to continue to grow as we have in recent years,” Greg Peters, co-CEO of Netflix, said during the earnings conference call.
“But we know we can do better. And it’s better for our potential. Our goal is to go from very good to excellent,” he added.
Wall Street analysts were looking for signs of whether the slowdown in engagement would be reflected in revenue growth numbers.
“That’s exactly what we’re seeing with the Q4 growth outlook,” Geetha Ranganathan, senior media analyst at Bloomberg Intelligence, told Yahoo Finance after the results were released.
“This speaks to a slowdown in the growth algorithm, which undoubtedly poses challenges for the business,” she added.
68.69 -1.16 (-1.66%)
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64.85 -3.84 (-5.59%)
These results follow the streaming giant’s job cut plan and a management shakeup announced last week amid slowing viewer engagement.
Last week, former Disney executive Peter Rice was named Netflix’s next chief content officer. Rice replaces Bela Bajaria, who worked at the streamer for nearly a decade and was CCO since 2023.
Also last week, Netflix announced it would cut 6% of its workforce, or about 1,000 employees, which would be the company’s largest workforce reduction since 2022.
The move comes as the company seeks to reignite audience growth and strengthen its content amid growing competition and short-form viewing habits.
Audiences are increasingly moving away from traditional TVs and toward mobile devices, noted Tom Champion, Piper Sandler director and senior research analyst, in a recent interview.
“A lot of the (video) growth has come from short form, content specifically designed for mobile,” Champion told Yahoo Finance. “This gave rise to TikTok and Instagram Reels, and increasingly, YouTube is emerging as the superpower in terms of video content.”
Earlier this year, Paramount outbid Netflix to acquire Warner Bros. Discovery and won shareholder approval for its revised $111 billion deal, including debt, in April.
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