Netflix shares tumbled after third-quarter results beat Wall Street estimates but a weaker-than-expected fourth-quarter outlook and a cut to the company's advertising revenue forecast overshadowed the headline numbers. Shares closed at $65.04, down 5.31% from $68.69, landing right at the stock's 52-week low of $65.08.
The quarter itself was mixed rather than bad: Netflix posted earnings of $0.87 a share, well above the $0.82 analysts expected, on revenue of $12.874 billion, essentially in line with the $12.876 billion consensus. The trouble came in the outlook. Netflix guided fourth-quarter revenue to $13.442 billion and earnings to $0.67 a share, both below Wall Street's $13.517 billion and $0.73 estimates, and narrowed its full-year sales guidance to $51.100 billion versus the $51.230 billion analysts had modeled. The company also cut its 2026 advertising revenue forecast by $300 million, a reduction of about 10%, citing delays in rolling out certain ad products.
Co-CEO Ted Sarandos addressed the shortfall directly, telling investors, "We do need better execution" in the U.S. business. Netflix also used its shareholder letter to confront growth concerns head-on, writing, "We know there's some investor concern about our view hours growth," while adding that it was "confident" it could reaccelerate that metric. The guidance landed alongside a fresh leadership shake-up after film division head Dan Lin's departure.
Analysts split sharply on what the results mean. Needham's Laura Martin downgraded Netflix to Hold, while Barclays, Guggenheim, Wedbush, Bernstein, Rosenblatt and BofA Securities trimmed their price targets to $65, $78, $80, $80, $71 and $90, respectively. On the other side, Deutsche Bank kept its Buy rating, arguing the quarter showed "no new negatives" beyond the advertising delay, and BMO Capital held its price target at $125.
The drop extends a rough stretch for the stock, which is down 7.84% over the last five trading days and 14.45% over the last 30, a steep retreat from its 52-week high of $124.86. The next test for investors will be whether the advertising business closes the $300 million gap and whether new content can ease the engagement concerns management itself acknowledged.