Netflix reported weaker-than-expected fourth-quarter profit guidance and reduced its 2026 advertising revenue forecast in its latest earnings report, released after market close on Tuesday. The company’s shares fell more than 5% in after-hours trading to $68.69, following the announcement.
Third-quarter revenue rose 11.8% year-over-year to $12.87 billion, meeting Wall Street expectations, but marked the lowest rate of increase in nearly three years. Net income for the quarter totaled $3.7 billion, a 44% increase from the prior year, though this figure was inflated by a one-time tax charge in Brazil in 2023. Earnings per share reached $0.87, surpassing analyst estimates of $0.82.
For the fourth quarter, Netflix forecast revenue of $13.4 billion, a 12% year-over-year increase, but projected net income of $2.79 billion and earnings per share of $0.67, both below analyst expectations of $3.07 billion and $0.73, respectively. The company also lowered its 2026 advertising revenue forecast to $2.7 billion, down from its prior estimate of $3 billion, citing a slower-than-expected rollout of ad product capabilities.
Executive Shake-Up and Workforce Reductions
Netflix recently laid off approximately 1,000 employees, representing 6% of its workforce, and replaced two top programming executives. Bela Bajaria, former Chief Content Officer, stepped down last week, and Dan Lin, the company’s film chief, announced his exit on Monday. Peter Rice, a former Disney executive, was named to replace Bajaria in the newly created role of Chief Content Officer.
Competition and Growth Challenges
The company faces stagnating subscriber growth and intensified competition from platforms like YouTube and TikTok, which have drawn viewership away from traditional streaming services. Netflix has expanded into video games, podcasts, and live events to diversify its offerings and retain users. Analysts have questioned the company’s strategy, with some arguing that Netflix should refocus on core streaming content.
In its earnings report, Netflix emphasized plans to license more third-party content and invest in original shows designed to spark conversation and drive membership growth. The company also highlighted new features for advertisers, aimed at improving audience targeting and ad measurement.
Stock Performance and Market Reaction
Netflix’s stock has declined about 44% over the past year, closing at $68.69 on Tuesday. The company’s ad-supported tier continues to attract users, though its advertising business has underperformed relative to expectations. Executives have indicated ongoing efforts to explore new avenues for growth amid a consolidating media landscape.