Netflix Reports Weak Q4 Forecast and Shares Slide After Earnings Miss
Netflix Q4 Earnings and Market Reaction
By Lisa Richwine
Weaker-than-Expected Forecast and Layoffs
LOS ANGELES, Oct 20 (Reuters) - Netflix issued a weaker-than-expected forecast for fourth-quarter profit on Tuesday, days after the streaming pioneer laid off 6% of its workforce and replaced two of its top programming executives.
Shares of Netflix fell more than 5% to $68.69 in after-hours trading.
Revenue and Profit Performance
Third-quarter revenue rose 11.8% to $12.87 billion, in line with Wall Street forecasts, but the lowest rate of increase in nearly three years. The company forecast fourth-quarter net income of $2.79 billion and EPS of 67 cents, below the average analyst forecast of $3.07 billion and 73 cents.
Advertising and Product Capabilities
Netflix reduced its advertising forecast for 2026 to roughly $2.7 billion, down from about $3 billion. Some ad product capabilities rolled out slightly slower than expected, executives said in their quarterly letter to shareholders.
Competitive Landscape and Growth Strategies
The company that shook up Hollywood when it started streaming TV shows and movies two decades ago is now competing with a surge in viewership on YouTube and TikTok. Netflix has invested in video games, podcasts and live events to draw new viewers and increase the time members spend on the platform.
Wall Street analysts have questioned how the company will kick-start growth.
Analyst Perspectives
"Netflix remains a well-oiled, highly profitable machine, but focused on too many unwanted distractions," PP Foresight analyst Paolo Pescatore said. "The company needs to get back to basics and focus on compelling content."
Content Strategy and Core Offerings
In its earnings report, Netflix said it would continue to expand its offerings through licensing more third-party content. Beyond that, it will focus on the core service of streaming TV, film and live events and invest in original shows that "spark conversation, bring in more members and make us a 'must-have' service," executives said in the letter.
Quarterly Highlights and Programming Changes
Q3 Earnings and New Programming
For the third quarter, earnings per share came in at 87 cents, ahead of the 82 cents average forecast of analysts surveyed by LSEG. New programming during the quarter included "Monster: The Lizzie Borden Story," the second season of "The Gentlemen," the final installment of "Outer Banks" and a reboot of "Little House on the Prairie."
Workforce Reductions and Executive Changes
Last week, Netflix laid off 1,000 people, or about 6% of its employees. The company replaced Chief Creative Officer Bela Bajaria and said film chief Dan Lin was departing, signs that it is resetting its programming strategy.
Acquisition Targets and Industry Moves
Earlier this year, Netflix lost a bidding war for Warner Bros Discovery and its rich library of characters, which was sold to David Ellison-led Skydance. Some analysts believe Netflix could go after other acquisition targets such as NBCUniversal after Comcast spins it off.
Subscriber Trends and Data Disputes
US Subscriber Losses
Netflix has posted monthly subscriber losses in the US throughout 2026, with no net additions reported for any month up to September, data from analytics firm Antenna showed.
Antenna Data Methodology
Antenna tracks US subscription purchases via sources like credit card transactions, but excludes subscriptions acquired through wholesale bundles. A Netflix spokesperson said the Antenna data were "not representative of Netflix's business performance."
(Reporting by Lisa Richwine in Los Angeles; Additional reporting by Jaspreet Singh in Bengaluru;Editing by Aurora Ellis)
