Netflix reported its slowest sales jump in three years and forecast a fourth consecutive quarter of slowing growth, a projection that amplifies concerns about the world’s leading online TV network.
Netflix delivered sales of $12.9 billion (€11.5 billion) in the third quarter, in line with Wall Street’s expectations, and forecast sales of $13.4 billion in the year’s final three months, falling short of what analysts have predicted. The pace of growth has fallen from 17.6 per cent in the final quarter of last year to a projection of 11.5 per cent for this year’s fourth quarter.
The company blamed its sales shortfall on the advertising business, which is on pace to deliver $300 million less than the company expected.
Shares fell as much as 7 per cent in trading after the results were announced.
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“I know we can do better,” Netflix co-chief executive Greg Peters said on a call with analysts Tuesday. “That better is our upside.”
Over the past week, Peters and co-CEO Ted Sarandos have overhauled the company’s leadership to address what they see as a decline in programming quality. Netflix fired chief content officer Bela Bajaria and film chief Dan Lin just days after announcing cuts of 6 per cent of the staff, or about 1,000 people. The last time Netflix made such substantial reductions was in 2022, when it reported its first quarterly subscriber loss in more than 10 years.
The company’s operating margin forecast for the fourth quarter of 26 per cent is impacted by costs associated with the job cuts. Earnings of 87 cents per share in the third quarter exceeded analysts’ projections for 82 cents.
Sarandos and Peters are walking a tightrope, seeking to assure investors that the company has a bright future while acknowledging things aren’t going as well as everyone would like. Netflix remains a clear leader in streaming. It has more than 325 million subscribers, which the company says equates to almost 1 billion viewers. It accounts for more viewing than any other Hollywood streaming service.
But Hollywood studios don’t overhaul their programming teams when everything is hunky dory. Netflix has gone months without a large, culture-shaping hit in film or TV and has struggled to lure viewers to both new shows and new seasons of older shows. Netflix’s haul of Emmy Awards fell to a 10-year low in 2026.
Sarandos and Peters brought in Peter Rice, a veteran film and TV executive who previously served as chairman of general entertainment at Walt Disney Co, and before that as president of 21st century Fox, to replace Bajaria.
“We see an opportunity to take our slate to the next level, especially in the US,” Sarandos said, touting Rice’s experience in all aspects of entertainment. Rice has worked in film and TV as both an executive and a producer. He also has deep relationships with top filmmakers.
“We want Netflix to always be the place people want to do the best work of their life,” Sarandos said.
Long a Wall Street darling, Netflix has faced growing scepticism ever since it made a play to buy the streaming and studios businesses of Warner Bros Discovery.
After losing out in its bid, Netflix has struggled to convince investors it has a viable growth strategy. The stock is down about 25 per cent this year and more than 40 per cent from a year ago.
Investors and analysts have pestered Netflix’s leadership about stagnant engagement. Netflix’s share of US TV viewership sits at 7.8 per cent, according to ratings tracker Nielsen, far behind YouTube, which captures about 14 per cent. And Netflix viewers watched only 2 per cent more programming in the first half of the year than a year earlier.
As Netflix has grown from a small US streaming service into a global behemoth, it has evolved from a producer of “prestige TV” shows like House of Cards and The Crown to a broader entertainment platform, competing with everything from sports channels to YouTube influencers.
Bajaria led the division that released hits like Squid Game and Wednesday, and helped shepherd Netflix’s live programming era with sports and an expanded unscripted portfolio.
But Bajaria’s hot touch cooled over the last year, and many began to question the quality of Netflix’s programming.
“Investors will need, in short order, some indications toward confidence in the growth trajectory that this powerful, global platform should be able to provide,” David Joyce, an analyst at Seaport Research Partners, said in a note before the results were released.
Netflix is seeking to increase the amount of time its users spend on the service by expanding into live sports, podcasts and video games while also integrating film and TV programming from third parties like TF1 in France. Peters said the company is open to integrating programming from other companies and will also look to sell other streaming services within Netflix. -Bloomberg
