Markets
Netflix Fell 6% After Hours, Its Sixth Straight Post-Earnings Drop, as Fourth-Quarter Guidance Missed and the Ad Forecast Was Cut to $2.7 Billion
Netflix earned $0.87 a share in the third quarter on $12.87 billion of revenue, beating the $0.82 consensus with an operating margin of 34.6%, and still fell to $64.62 in after-hours trading on October 20, down 5.9%. The company guided fourth-quarter revenue to $13.44 billion against $13.51 billion expected and cut its 2026 advertising target from $3 billion to $2.7 billion. Options had priced a 9% move, the largest before a Netflix report since 2022.
The quarter was fine. The guidance was not. Netflix reported third-quarter earnings of $0.87 a share on October 20 against a consensus of $0.82, on revenue of $12.87 billion, up about 12% and in line with forecasts, and an operating margin of 34.6%, above the 33.2% the company itself had projected; operating income rose 37% to $4.46 billion. Then it said fourth-quarter revenue would be $13.44 billion, about $70 million short of the $13.51 billion analysts had modelled, which implies growth of about 12% against 17.6% in the same quarter a year earlier, and cut its 2026 advertising revenue target from $3 billion to $2.7 billion, blaming a slower rollout of ad-product features.
The stock, which had closed the regular session down 1.66% at $68.69, fell to $64.62 in extended trading, a 5.93% drop according to Investing.com, and traded as low as about $64 in the first hour. That makes six consecutive reports after which the shares have fallen, including a 9% drop in July on a one-cent beat. Options had implied a move of about 9% in either direction, according to CNBC, the largest before a Netflix report since the third quarter of 2022; the median move after the last eight reports was 7.25%.
Management argued the engagement problem is contained. "Our engagement is solid, and it will allow us to continue to grow as we have for the last several years," co-chief executive Greg Peters said, adding that the aim was "to go from very good to great." The analysts quoted by Yahoo Finance disagreed about the direction. Geetha Ranganathan of Bloomberg Intelligence said the fourth-quarter outlook confirmed that slowing engagement is now reaching revenue, a "slowing growth algorithm" she called trouble for the company; Tom Champion of Piper Sandler said the growth in video is happening in short-form, mobile-first formats on TikTok, Instagram Reels and YouTube, not on television sets.
The report landed on a company that had reset its narrative the week before: about 1,000 job cuts, 6% of the workforce and the largest reduction since 2022, and the replacement of chief content officer Bela Bajaria by the former Disney executive Peter Rice. Netflix was outbid by Paramount for Warner Bros. Discovery earlier this year. The shares are down roughly 25% in 2026 and 48% from their June 2025 record, and at $64.62 they are back at the levels of the July sell-off.
What the after-hours price says is that a beat on margin cannot offset a miss on growth when the multiple has already compressed from 31 times forward earnings to under 19. Wednesday's regular session will show whether the buyers who paid for a 9% implied move take a 6% drop as a reason to step in, or as the first leg. Meta and Tesla report after the close, and after Netflix the market will read every revenue line for the same word: slowing.