Netflix expects lower fourth-quarter profit than Wall Street forecast and has cut its annual advertising revenue target. The streaming company reported its third-quarter results on Tuesday, October 20, and its shares fell almost 6% in after-hours trading.
Netflix forecast earnings of 67 cents a share for the three months to December, below the 73 cents analysts had expected, reported. It also predicted net income of $2.79bn, against estimates of $3.07bn.
The outlook came a week after Netflix laid off about 1,000 people, roughly 6% of its staff. It also replaced content chief Bela Bajaria with former Disney executive Peter Rice.
In the third quarter, revenue rose 12% to $12.87bn, in line with forecasts, according to the company’s shareholder letter. That was the slowest growth in nearly three years, Reuters said. Earnings of 87 cents a share beat the 82-cent average estimate compiled by LSEG.
Netflix now expects about $2.7bn in ad revenue this year, down from roughly $3bn, because some advertising features rolled out more slowly than planned. Full-year revenue should reach $51.1bn, at the bottom of the range it set after its second-quarter results in July.
“We are currently a bit behind our aggressive target for the year,” co-CEO Greg Peters said of the ad business, according to TheWrap.
Ted Sarandos, the other co-CEO, struck a similar tone on the post-earnings video call.
“I know that we could do better,” he said.
Sarandos said the company didn’t need to change its strategy, but it did need to execute better in the US. Data from analytics firm Antenna show Netflix lost US subscribers every month through September 2026, excluding wholesale bundles. A Netflix spokesperson told Reuters the data did not reflect its business.
The fourth-quarter operating margin forecast of 26% includes a hit of about 1.2 percentage points from the job cuts. Netflix also spent $4.8bn buying back its own shares in the third quarter, its largest quarterly buyback. Before the results, the stock had already lost more than 40% over the past year.
Netflix plans to bring its cheaper, ad-supported plan to 15 more countries in 2027. The rollout starts in March with nine countries in Europe, the Middle East and Africa, plus Colombia, Peru and New Zealand.
The company is betting on a busy final quarter, with three NFL games, the last season of Emily in Paris, and a boxing match between Tyson Fury and Anthony Joshua.