Netflix hit $12.9 billion in third quarter revenue, roughly matching Wall Street's target, and reported profit of 87 cents per share against a 82 cent estimate. For the last quarter of the year, the company guided to $13.4 billion in sales, shy of what analysts were looking for, and said its growth rate is set to decelerate to about 11.5% from the 17.6% pace it posted in the same quarter a year earlier. The gap traces to advertising, which the company says will deliver $300 million less than it had anticipated. The stock slid up to 7% in trading after the release.
Last month, Co CEO Ted Sarandos told Bloomberg the company isn't growing as rapidly as he'd like and said he is "working on making that move faster." In the past week, Netflix replaced key creative leadership to address what Sarandos views as weaker programming quality, removing Chief Content Officer Bela Bajaria and the head of film, Dan Lin. Days earlier, the company announced job reductions equal to 6% of its workforce, or about 1,000 roles. The last time cuts of that scale happened was in 2022, when Netflix disclosed its first quarterly decline in subscribers in over a decade.
Peter Rice - a veteran of film and television who had been the chairman overseeing General Entertainment at Walt Disney Co., and earlier held the role of president at 21st Century Fox - was appointed to replace Bajaria. Netflix said its fourth quarter operating margin forecast of 26% reflects expenses tied to the layoffs.
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Netflix says it remains the streaming leader, with more than 325 million subscribers that it estimates translate to nearly 1 billion viewers, and it claims a larger share of viewing than any other Hollywood streaming rival. But the company has gone months without a pop culture defining hit and has had trouble pulling audiences to both fresh series and follow up seasons. Its Emmy wins fell to a 10 year low in 2026.
In the US, Nielsen data show Netflix at a 7.8% share of TV viewing versus YouTube at about 14%, and viewing time on Netflix during the first six months of the year was just 2% higher than the comparable period a year earlier. To boost engagement, Netflix plans to push further into sports streamed live, podcast programming, and gaming, and it will also step up licensing of outside films and series, with additions that include shows from TF1 in France.
"With intense competition and an explosion of content competing for consumer attention, strategic clarity and excellent execution are critical," the company wrote to shareholders, adding that while executing on priorities, "we see room to do even better." Skepticism has built since Netflix pursued, and failed to win, the streaming and studios assets of Warner Bros. Discovery Inc. The shares have fallen about 25% this year and are off more than 40% versus a year ago. Ahead of the print, Seaport Research Partners' David Joyce wrote, "Investors will need, in short order, some indications toward confidence in the growth trajectory that this powerful, global platform should be able to provide." The bottom line: scale is intact, but momentum is softer. The quarter hands you hard numbers to model against your portfolio assumptions - $12.9 billion in Q3 revenue, 87 cents EPS versus 82 cents expected, a $13.4 billion Q4 sales guide, a 26% margin outlook weighed by severance, and a content strategy now under new leadership.
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