Netflix Drops 6% After Hours as Ad Forecast Cut and Weak Q4 Outlook Alarm Investors

Netflix fell more than 6% in after-hours trading on October 20 after the streaming company cut its full-year advertising revenue forecast to $2.7 billion and issued fourth-quarter profit guidance that fell short of Wall Street estimates. The disappointing outlook overshadowed a Q3 earnings report that beat consensus estimates for both revenue and earnings per share, leaving investors focused on the company's slowing growth trajectory. Shares had already shed roughly 25% to 27% year to date heading into the print, erasing approximately $135 billion in market value.

The earnings release came days after Netflix laid off 6% of its workforce and replaced two senior programming executives, moves that signaled an internal overhaul. Co-CEO Ted Sarandos acknowledged on the earnings call that the company "could do better," citing intensifying competition from YouTube and TikTok for viewer time. CFO Spence Neumann pointed to three drivers intended to sustain double-digit revenue growth into 2027, including advertising, pricing power, and content investment, with the NFL cited as a potential catalyst for viewing-hour gains.

Analysts reacted with a mix of maintained ratings and lower price targets. William Blair kept its Outperform rating, and KeyBanc held its rating citing healthy subscriber retention. Bernstein cut its price target and warned that changes to Netflix's business model could take years to pay off amid uncertainty about 2027 targets. Evercore ISI lowered its target to $90, tied directly to the ad revenue shortfall, while Oppenheimer and JPMorgan also trimmed their targets. Raymond James reiterated its rating. ETFs with heavy Netflix exposure came under pressure alongside the stock. Regional revenue maintained double-digit growth in Q3 but at a cooling pace, and Bernstein flagged that the advertising pivot remains a multiyear project with no near-term payoff guaranteed.