Profit beats estimates as revenue climbs 12%
Netflix posted third-quarter revenue of $12.87 billion, a 12% increase that edged past analyst expectations, the Los Gatos-based company said Tuesday. Net income reached $3.7 billion, a 44% jump, and earnings per share of $0.87 topped the $0.82 that analysts surveyed by FactSet had projected. The year-earlier profit figure was depressed by a one-time tax charge in Brazil, which makes this year's comparison look stronger.[S1]
Netflix guided fourth-quarter revenue to $13.4 billion, a 12% year-over-year increase. Over the last twelve months, the share price has dropped 44%. The stock ended Tuesday's session at $68.69, roughly 2% lower ahead of the earnings release, then slipped a further 5% in after-hours trading.[S1][S4]
Advertising forecast cut on slower product rollout
Advertising proved the soft spot — the segment Netflix has counted on to drive growth. The company trimmed its 2026 ad revenue outlook to $2.7 billion from $3 billion, attributing the cut to some ad product features rolling out more slowly than anticipated. Consequently, Netflix now guides to $51.1 billion in full-year revenue, at the bottom of its prior $51 billion to $51.4 billion range.[S1][S2][S3]
Layoffs and executive turnover cap a turbulent stretch
The results landed after a rough week for the streamer. Netflix eliminated roughly 1,000 positions — 6% of its staff — marking its biggest layoff round since 2022, and installed former Disney executive Peter Rice as chief content officer in place of longtime executive Bela Bajaria. Earlier in the week, on Monday, the company disclosed that film chief Dan Lin was leaving.[S1][S6]
Once seen as the streaming wars' clear victor, Netflix is now questioned about how it will hold up against competitors like YouTube, which captured 14.2% of Americans' total TV viewing time in July versus Netflix's 7.8%, per Nielsen. According to analysts, the company has had trouble launching new hits to fill the gap left by concluded franchises including Stranger Things and Squid Game, and several popular titles posted sharp second-season audience drops this year.[S1][S5]
Analysts split on the path forward
The company sought to expand its library by pursuing Warner Bros. Discovery but withdrew from the auction after the deal was no longer financially attractive. Tom Nunan, a former president of the United Paramount Network, said Netflix has been in a slump since it decided to pursue Warner Brothers, describing the episode as a huge distraction for the streamer.[S1]
Pivotal Research Group CEO Jeffrey Wlodarczak said he rates the stock a hold and expects a turnaround to take time. Activate Consulting CEO Michael J. Wolf countered that Wall Street underestimates the full range of Netflix's potential, citing opportunities in the Middle East and Asia, its advertising operation, and established franchises like Bridgerton.[S1]
