Netflix Stock Hits Two-Year Low After Q4 Revenue Guidance and Ad Forecast Disappoint

Netflix shares fell more than 6% to a two-year low Wednesday, touching $65.07, after the company's third-quarter earnings report delivered an earnings beat but underwhelmed investors with a soft fourth-quarter outlook and a cut to its advertising revenue forecast. The stock has now lost roughly half its value over the past year and is down about 27% to 38% year-to-date, erasing approximately $135 billion in market capitalization.

For the third quarter, Netflix reported revenue of $12.874 billion, up 12% year over year and in line with consensus estimates of $12.875 billion, though it marked the slowest revenue growth in three years. Earnings per share of $0.87 beat the consensus estimate of $0.82. Operating income rose 37% year over year to $4.58 billion, and operating margin expanded sharply to 34.6% from 28.2% a year earlier, ahead of guidance due to expense timing.

The damage came from forward guidance. Netflix forecast fourth-quarter revenue of $13.44 billion, short of the Wall Street consensus of $13.51 billion, and guided fourth-quarter EPS of $0.67 against expectations of $0.73. The company also trimmed its full-year 2026 revenue forecast to $51.1 billion, the bottom of its previously stated range, implying roughly 13% annual growth. Most significantly, Netflix cut its full-year advertising revenue projection by 10% to $2.7 billion, attributing the reduction to delays in its ad technology rollout. Analyst Dan Ives described these as cutting "two of the numbers that matter most."

The report arrived days after Netflix reportedly laid off 6% of its workforce and replaced two top programming executives, adding to investor unease about the company's trajectory. Co-CEO Ted Sarandos acknowledged the company "could do better," and said the two problems weighing on growth are unrelated to YouTube competition, though he did not name them specifically. Media analyst Tom Rogers warned that having the largest entertainment budget will no longer be the decisive competitive factor it once was, as rivals including YouTube and Skydance gain ground.

Analyst reaction was mixed but broadly cautious. Needham downgraded Netflix from Buy to Hold, citing slowing growth. UBS cut its price target to $100 from $115, Evercore ISI lowered its target to $90, and Rosenblatt trimmed its target to $71. JPMorgan, Oppenheimer, Bernstein, and Canaccord also cut their targets. William Blair, BMO, Raymond James, KeyBanc, TD Cowen, and Citizens maintained their ratings, with several citing the earnings beat, margin expansion, and the company's reaffirmed full-year operating margin guidance of 31.5%, up from 29.5% last year, as reasons to hold. Deutsche Bank called the results "no new negatives" and recommended buying the dip, while Bank of America said the quarter was not a "narrative changer."

Looking ahead, Netflix CFO Spence Neumann pointed to continued double-digit revenue growth into 2027 and highlighted three growth levers. The company also disclosed plans for 30 theatrical releases in 2027 as part of a broader strategy shift. One analyst predicted Netflix will pursue an acquisition of NBCUniversal following its anticipated spinoff, though John Malone said the Trump administration had already signaled Netflix had "no chance" of regulatory approval for a Warner Bros. Discovery merger.