Netflix The company’s third-quarter profit, announced Tuesday, beat analysts’ expectations and kept sales in line as Wall Street focused on the company’s engagement and advertising metrics.
Here’s how Netflix performed for the period ending September 30, compared to the forecasts of analysts surveyed by LSEG:
Earnings per share: 87 cents vs. estimated 82 cents Revenue: $12.87 billion vs. $12.87 billion estimated
The company said the streamer’s revenue rose about 12% year-over-year due to membership growth and a hike in subscription fees that took effect in March. Netflix said its response to these price increases is consistent with previous changes and the company’s expectations.
Net income for the quarter was $3.66 billion, or 87 cents per share, compared with $2.55 billion, or 59 cents per share, in the year-ago period. Netflix said the jump in profits from a year earlier was due in part to the timing of expenses.
The company said it expects fourth-quarter revenue to rise more than 11% to $13.44 billion due to growth in membership, pricing and advertising revenue.
The company cut its full-year forecast for 2026, saying it now expects sales to reach $51.1 billion, up 13% from a year ago. According to LSEG, this is on the lower end of the range of $51 billion to $51.4 billion that Netflix offered in its last earnings report and is lower than Wall Street’s estimate of $51.2 billion for this year.
Netflix stock fell about 6% in extended trading Tuesday.
Samuel Boivin | Null Photo | Getty Images
Wall Street and investors will want Netflix to provide more details about its strategy following recent organizational changes and headwinds such as stagnant viewership and increased competition from the likes of YouTube.
“With intense competition and an explosion of content seeking consumer attention, strategic clarity and superior execution are critical,” the company said in a letter to shareholders on Tuesday. “While we achieved good results across all three of our priorities in the third quarter, we believe there is room for further improvement through focused and continuous improvement.”
Netflix announced last week that it would lay off about 1,000 people, or about 6% of its workforce, and that chief content officer Bela Bajaria would be leaving her role.
The company announced Tuesday that it expects its fourth quarter results to be impacted by these layoffs, which will have an approximately 120 basis point negative impact on operating margins.
Former Disney executive Peter Rice has been named the company’s new CCO, but it’s not yet clear how he will address ratings concerns.
In a letter to shareholders, Netflix said it was “aware of investor concerns about our viewing time growth,” but added that “engagement, including the quantity, quality, and diversity of viewing, remains healthy and…we continue to deliver strong value to our members.”
The company aims to accelerate growth in these viewing hours and said it plans to do so with a three-step strategy. Leverage technology to improve all aspects of our services. and improve monetization.
Netflix ads
Central to Netflix’s value proposition is its cheaper, ad-supported tier. Still, the company lowered its full-year revenue forecast for its advertising business on Tuesday.
Netflix said it expects ad revenue to be about $2.7 billion in 2026, a downward revision from the company’s previous forecast of about $3 billion. The company said the lower guidance was due to slower-than-expected rollout of some advertising product features.
“Our advertising business has experienced truly impressive growth since we launched, and we’re confident we have a long road ahead of us for continued growth,” co-CEO Greg Peters said on the company’s earnings call. “We’ve set big growth goals for our advertising business this year. We’ve established an aggressive product roadmap that aligns with that strategy. And, of note, while we believe the build we’ve been on to date is the fastest build of a comparable ad stack in the industry, we’re currently a little behind our aggressive goals for this year.”
Earlier on Tuesday, Netflix announced new features for advertisers to help them better connect their brands with the right audience and measure the effectiveness of their ads.
