- Netflix posted revenue of $12.87 billion, in line with Wall Street estimates, and a stronger-than-expected profit of 87 cents per share, compared to 82 cents per share expected by analysts, per Yahoo Finance.
- But the streamer narrowed its 2026 revenue forecast to $51.1 billion, a 13% increase over the prior year but the lower end of its previous guidance. It also projected fourth-quarter revenue growth of 11.5%, a slowdown from the prior year period’s 17.6% increase.
- The latest quarterly results come days after the company laid off 6% of its workforce and fired its Chief Content Officer Bela Bajaria and film chief Dan Lin.
Netflix shares tumbled 6% in after-hours trading on Tuesday after the streamer projected a slowdown in fourth-quarter revenue growth and lower-than-expected ad sales for the full year.
The company narrowed its full-year revenue forecast to $51.1 billion, a 13% increase over the prior year but the lower end of its previous guidance. That change was driven in part by ad revenue for the year, which is now expected to come in at roughly $2.7 billion, down from its previous $3 billion guidance. It also forecast fourth-quarter revenue growth of 11.5% to $13.4 billion — a slowdown from the prior year period’s 17.6% increase — and a profit of $2.8 billion, or 67 cents per share.
The outlook, which was below Wall Street expectations, overshadowed a stronger-than-expected third-quarter profit of $3.7 billion, or 87 cents per share, boosted by growth in subscriptions and advertising, as well as pricing changes. Revenue grew 11.8% to $12.87 billion, in line with Wall Street estimates.
The latest quarterly results came days after the streamer fired its Chief Content Officer Bela Bajaria and film chief Dan Lin, as well as 6% of its total workforce, as it struggles to grow engagement on the platform — its largest cuts since 2022.
After previously reporting engagement growth grew just 2% in the first half of 2026, the company said it would shift from a bi-annual to annual publication of its engagement reports starting in 2027 as it looks to focus on revenue and operating profit.
Costs associated with the layoffs are expected to weigh on its fourth-quarter operating margin, which is projected to fall to 26%, though that is up from a 24.5% margin in the year ago quarter. The company said that the organizational changes would allow it to “aggressively invest in high impact areas” to improve the service and “drive growth and innovation.”
“The company needs mandate that requires the whole organization to ask hard questions about where can we be more efficient, where can we make tough decisions about where we can trim or redirect how we’re investing,” Netflix co-CEO Ted Sarandos said. “We do not take these decisions lightly, but we also believe we have a responsibility to make hard trade-offs in service of our members, our partners, our employees, our investors, and ultimately our long-term growth.”
Despite the layoffs and engagement challenges, Sarandos that the company’s strategy remains unchanged and that the service has “healthy retention” in every region. He added that members’ response to recent pricing changes were consistent with prior adjustments and within expectations.
“Our engagement is solid and it will allow us to continue to grow as we have for the last several years,” Sarandos added. “But we know that we can do better.”
In order to boost engagement, Netflix has expanded its live events and sports rights and added gaming, podcasts and content from French broadcaster TF1 to its programming lineup. In addition to TF1, Netflix struck a new content licensing deal with Disney and said it would look to expand its offering with more third-party partnerships. The company will spend a total of $20 billion on content inn 2026.
Moving forward, Netflix’s content strategy will be overseen by former Disney and Fox executive Peter Rice, who is replacing Bajaria.
“His creative instinct and his business acumen are remarkable. He’s really an at-scale, quality and volume operator, and he does it across every imaginable form of entertainment, network, prestige cable, streaming, theatrical and TV films, and live sports,” Sarandos said. “But most importantly, Rob, Peter Rice understands talent relations, and in a competitive market, creative talent have choices of where they want to work. We want Netflix to always be the place that they love to do the best work of their life. Peter is the exact right person to lead those efforts in the U.S. and around the world. That’s a key aspect of what I believe Peter can improve on looking forward.”
Netflix also continues to scale its ad-supported tier, which will launch in 15 new countries in 2027. The first tranche of new market launches will happen in March, which includes nine countries in Europe, Middle East and Africa region, Colombia, Peru and New Zealand.
Additionally, the company also updated its homepage, revamped its mobile app with a vertical video feed to help subscribers discover and sample content faster and acquired Ben Affleck’s AI startup InterPositive as it looks to leverage the technology to help boost growth. In 2026, GenAI workflows have been used in roughly 300 of Netflix’s titles, with the largest concentration of work in post-production.
Though Netflix’s $83 billion deal to acquire Warner Bros. Discovery’s streaming and studio assets collapsed earlier this year after it declined to match a rival bid from David Ellison’s Paramount Skydance, the company noted in its shareholder letter that it remains open to “selective M&A.”
More to come…
