- 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’s executives failed to assuage Wall Street’s concerns about its growth during the company’s third-quarter earnings call.
Revenue for the quarter grew 11.8% as the company posted a stronger-than-expected profit of $2.8 billion, driven by growth in subscriptions and advertising, as well as pricing changes. But that was overshadowed by a projected slowdown in fourth-quarter revenue growth and softer-than-expected ad sales for the full year.
Full-year revenue for 2026 is now forecast to hit $51.1 billion, a 13% increase over the prior year but the lower end of its previous guidance, while ad sales are expected to come in at roughly $2.7 billion, down from $3 billion previously. Meanwhile, fourth-quarter revenue is expected to grow 11.5% to $13.4 billion — a slowdown from the prior year period’s 17.6% increase.
The weaker outlook comes days after Netflix fired 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. Those cuts were the streamer’s largest since 2022.
In July, the company said it would shift to an annual release of its engagement reports after the metric increased just 2% for the first half of 2026. Netflix’s growth challenges have been exacerbated by the collapse of its $83 billion deal to acquire Warner Bros. Discovery’s streaming and studio assets earlier this year and increased competition from YouTube.
On Tuesday, Netflix said the layoffs would allow it to “aggressively invest in high impact areas” to improve the service and “drive growth and innovation.” But associated costs 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 needs a 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 Greg Peters 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, Co-CEO Ted Sarandos said 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.
Though Netflix is a “streaming first” business at its core, executives added that the company will release 30 films theatrically this year. A handful of those films will receive a traditional 45-day theatrical window. The company has also started reporting box office grosses for theatrical releases, starting with “La Bola Negra.”
Moving forward, Netflix’s content strategy will be overseen by former Disney and Fox executive Peter Rice.
“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, 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.”
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.
Additionally, Netflix 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.
“We do see a long road of continued growth ahead of us,” Peters said. “We set big growth targets for our ads business this year, we established an aggressive product roadmap that was consistent with that strategy the build out that we’ve been on is the fastest build out of a comparable ad stack in our industry. But we are currently a bit behind our aggressive target for the year.”
Though ads business has grown over 80% in 2026, Peters cited delays in the rollout and partner integrations of new ad products, but emphasized it would not impact long-term gains.
“We strongly believe that a modest short-term hit for a better long-term strategic position is a good ultimate trade-off,” he added.
Sarandos and Peters did not address M&A during the call, though Netflix executives noted in its shareholder letter that the company remains open to “selective M&A.”
Netflix shares are down 44% in the past year and 27% in the past six months.
