Netflix Shares Slip as Revenue Growth Worries Overshadow Profit Beat
The streaming giant's third-quarter earnings surpassed expectations, but a lowered ad sales forecast and ongoing competition cast a shadow over its performance.
Netflix reported a third-quarter profit exceeding Wall Street expectations, though its shares declined in after-hours trading due to concerns over slowing revenue growth, particularly from its advertising business.
The company announced Tuesday that it earned $3.66 billion, or 87 cents per share, for the July-September period. This represents a 44% increase from the $2.55 billion, or 59 cents per share, earned in the same quarter last year. Revenue climbed 12% to $12.87 billion from $11.51 billion.
Analysts had projected earnings of 82 cents per share on revenue of $12.87 billion. However, investors reacted negatively to Netflix's reduced guidance for its ad sales.
"With Netflix under pressure to find alternative lines of revenue beyond subscriptions, it’s concerning that the company lowered its estimate for its ad business," said Emarketer senior analyst Ross Benes. "Revamping content strategy is not enough to fix this challenge but it is a worthwhile start. Guidance is not as aggressive as investors have grown accustomed to.”
These financial results follow recent organizational changes at the streaming service. Last week, Netflix announced plans to lay off approximately 6% of its workforce, which amounts to nearly 1,000 positions. At the end of 2025, the company had about 16,000 full-time employees globally. This marks the largest round of layoffs in years.
Additionally, Chief Content Officer Bela Bajaria is set to be replaced by Peter Rice, effective Oct. 26. Rice will oversee Netflix's global content operations, including series, film, and live events. Bajaria had been with the company for nearly a decade.
Netflix faces significant competition in the streaming market from rivals such as Amazon's Prime Video and Disney+. The competitive landscape was further reshaped by the recent acquisition that brought HBO Max and Paramount+ under the same corporate umbrella.
Shares of Netflix fell 4.1% to $65.90 in after-hours trading following the earnings release. As of Tuesday's market close, the company's stock is down approximately 25% year-to-date.
Analysts point to several factors contributing to the company's current challenges, including soft engagement trends, decelerating revenue growth, a slower outlook for margin expansion, and recent changes in content executive leadership, according to John Belton, portfolio manager at Gabelli Funds.