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Netflix Beats Earnings Estimates — But Shares Slide as Ad Business Guidance Craters
Netflix topped Wall Street's profit targets for the third quarter, but investors sent shares tumbling after the streamer slashed its advertising outlook and detailed a workforce reduction.
LOS GATOS, CALIF. — Netflix delivered another quarter of profit growth that beat Wall Street's targets, but the stock fell anyway after the company detailed a shrinking advertising business and a round of layoffs.
The streamer reported third-quarter earnings per share of $0.87, ahead of the roughly $0.82 to $0.83 analysts had expected, on revenue of $12.87 billion, up 12% from a year earlier, according to figures reported by QuiverQuant. Operating income climbed 37% year over year to $4.5 billion, and operating margin expanded to 34.6% from 28.2% in the same quarter last year.
Shares fall despite the beat
None of that was enough to keep the stock steady. Shares dropped roughly 6% in extended trading, according to Kaohoon International, as investors zeroed in on guidance rather than the headline beat. Netflix narrowed its full-year 2026 revenue forecast to about $51.1 billion, just under the $51.2 billion analysts had penciled in, and guided fourth-quarter revenue above $13.44 billion, per NewsBytes.
NETFLIX CUT ITS 2026 AD-REVENUE TARGET TO ABOUT $2.7 BILLION, DOWN FROM ROUGHLY $3 BILLION
The sharper disappointment was on the advertising side, long pitched as Netflix's next major growth lever as it built out its ad-supported tier. The company cut its 2026 ad revenue target to about $2.7 billion, down from a prior goal near $3 billion, attributing the shortfall to slower-than-expected integration of certain advertising product features. Netflix also confirmed it had cut roughly 6% of its workforce, a move it said would weigh on fourth-quarter operating margin by about 120 basis points as severance and related costs flow through.
Reading the reaction
The split reaction — a clean profit beat paired with a steep after-hours drop — reflects how closely Wall Street is now tracking Netflix's advertising ramp as a signal of its next growth phase, rather than subscriber or revenue growth alone, which have both remained solid. The company has not reported quarterly subscriber counts since 2025, pushing analysts to lean more heavily on revenue, margin and ad-tier guidance to gauge the business's health.
Netflix executives are expected to face further questions on the ad business and the scope of the layoffs on the company's next earnings call, as investors look for signs of whether the ad shortfall is a timing issue or a deeper demand problem.