Netflix stock falls after weak Q4 forecast misses estimates
Web StoryWatch this story in 15 seconds →Key takeaways
- Netflix beat its Q3 profit target, but its stock still fell. Investors disliked the weak forecast for the last quarter of 2026.
- The company cut its 2026 ad revenue goal from $3 billion to $2.7 billion. It replaced two top programming leaders after cutting 1,000 jobs.
- Growth is slowing while YouTube and TikTok win more viewers. Netflix now bets on ads, games, podcasts, and live events.
Netflix reported strong third-quarter profit on Tuesday. But its stock fell about 6 percent after trading hours. The reason: its forecast for the fourth quarter was weaker than Wall Street expected.
What happened
Netflix shared its Q3 2026 results after the US market closed on October 20. The quarter itself was solid.
Revenue reached $12.87 billion, up 11.8 percent from last year. That matched what analysts expected, according to Yahoo Finance.
Profit was even better than expected. Earnings per share came in at 87 cents. Analysts had expected 82 cents, according to Reuters.
But investors cared more about the future than the past. Netflix said fourth-quarter revenue would be about $13.44 billion.
Analysts expected $13.51 billion. The company also forecast profit of 67 cents per share for Q4.
Analysts expected 73 cents. Net income was guided at $2.79 billion, below the $3.07 billion consensus.
The gap was small but it shook the market. Shares closed Tuesday at $68.69, down 1.7 percent.
After hours, the stock fell about 6 percent more. Reuters and Yahoo Finance reported the drop.
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Why it matters
A stock often moves on the forecast, not the results. That is what happened here.
The third quarter was fine. The fourth quarter guide was not.
The ad business is a key worry. Netflix now expects about $2.7 billion in ad revenue for 2026.
It had earlier guided to $3 billion. Executives said some ad products took longer to build than planned, according to Yahoo Finance.
Growth is also slowing down. Revenue rose 11.8 percent this quarter.
That is the slowest growth in nearly three years. One year ago, growth was much faster.
Competition is getting tougher. YouTube and TikTok keep winning viewer attention. Netflix has invested in video games, podcasts, and live events to keep people watching longer.
The company is also in the middle of a big shakeup. Earlier this month, Netflix cut close to 1,000 jobs.
That is about 6 percent of its workforce. It was the largest staff cut since 2022.
The company replaced chief creative officer Bela Bajaria. Film chief Dan Lin is also leaving. Former Disney executive Peter Rice will lead content going forward.
Co-CEO Ted Sarandos admitted the problem. "Overall, we're not growing as fast as I want us to." Sarandos said this at a Bloomberg event.
The stock has been in pain all year. It is down more than 40 percent over the past year, according to Reuters. Data from Finnhub shows it now trades far below its 52-week high of $125.
What happens next
Netflix must now prove it can restart growth. Management says it will license more shows from other studios. It will also focus on its core service: streaming TV, films, and live events.
Co-CEO Greg Peters tried to sound hopeful on the earnings call. "Our engagement is solid," he told analysts.
"But we know that we can do better. It's our goal to go from very good to great."
Some traders think the worst may be over. CNBC reported that option traders are betting the long slump may end.
Options prices implied a 9 percent move after earnings, the highest since late 2022. Several large bullish trades were placed on Tuesday.
Others are less sure. Bloomberg Intelligence analyst Geetha Ranganathan was less hopeful.
She called the slowdown "trouble for the company without a doubt," per Yahoo Finance.
Netflix also lost a big deal this year. It failed to buy Warner Bros Discovery and its rich library of shows. The studio went to David Ellison's Skydance instead, according to Reuters.
The next test is the holiday quarter. Christmas is Netflix's biggest season.
Strong new shows could bring viewers back. Weak shows could push the stock down again.
Investors will also watch the ad business closely. If ad revenue grows faster than expected, the stock could recover. If it keeps lagging, more pain may follow.
Netflix remains a giant, but the easy growth years are over. The next chapter depends on new shows and better ads.
It also depends on winning viewers back from YouTube and TikTok. The fourth quarter will show whether the turnaround plan is working.
This article is for information only and is not financial advice.
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