Netflix, which announced layoff plans last week, posted a third-quarter profit above Wall Street's expectations, but investors sent shares down after the streaming company lowered its ad sales guidance, prompting worries about slowing revenue growth.
Netflix said Tuesday it earned $3.66 billion, or 87 cents per share, for the July-September period. That's up 44% from $2.55 billion, or 59 cents per share, a year earlier.
Revenue rose 12% to $12.87 billion from $11.51 billion.
Analysts surveyed by FactSet predicted earnings of 82 cents per share on revenue of $12.87 billion.
“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.”
Last week, the Los Gatos, California-based company announced that it plans to lay off about 6% of its workforce, amounting to nearly 1,000 positions, as the company makes wider “organizational changes.” At the end of 2025, per regulatory filings, Netflix had about 16,000 full-time employees worldwide. The most recent layoff announcement marks the biggest round of cuts that the company has rolled out in years.
Netflix also announced last week that Chief Content Officer Bela Bajaria will be replaced by Peter Rice. Bajaria was with Netflix for nearly a decade. Rice will lead Netflix’s global content organization, overseeing scripted and unscripted series, film, live events and more across all regions. He takes over the post on Oct. 26.
While Netflix has benefited from membership signups and price increases, the company is dealing with intense competition in the streaming sector from companies such as Amazon’s Prime Video and Disney+. There's also Skydance, after Paramount’s $81 billion buyout of Warner Bros. Discovery put HBO Max and Paramount+ under the same roof. Netflix walked away from its offer to buy Warner Bros. Discovery’s studio and streaming business in February.
Shares of Netflix fell $2.79, or 4.1%, to $65.90 in after-hours trading after the results came out.
As of Tuesday's close, Netflix's stock is down about 25% for the year to date. Analysts see several factors contributing to its difficulties.
“Investors are concerned about soft engagement trends, decelerating revenue growth, a slower margin expansion outlook, and most recently content executive leadership changes,” said John Belton, portfolio manager at Gabelli Funds.
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