Markets
Netflix Reports Tonight After Cutting 1,000 Jobs and Replacing Its Content Chief. The Stock Is Down 25% This Year and Has Fallen After Five Straight Reports
Netflix reports third-quarter earnings after the close on October 20, with consensus at $0.82 a share on revenue of $12.87 billion, up 11.8% and the slowest third-quarter growth in three years. In the six days before the report it cut about 6% of its staff, replaced chief content officer Bela Bajaria with former Disney executive Peter Rice and parted with film chief Dan Lin. US churn rose 16.6% last quarter and average viewing has fallen to 49 hours a month from 66 in 2023, according to Jefferies.
Netflix will report its third quarter at the close of US trading on Tuesday, October 20, with a call at 4:45 p.m. ET, and for once the numbers are the least dramatic part of the story. On October 14 the company cut about 1,000 jobs, roughly 6% of its workforce and its largest round of layoffs since 2022, across human resources, legal, product and technology. On October 15 it announced that Bela Bajaria, chief content officer since January 2023, would leave and that Peter Rice, the former Disney and Fox executive, would take the role from October 26. Variety reported on Monday that Dan Lin, head of film for almost three years, is also out.
The consensus the company has to meet is modest. Analysts expect earnings of about $0.82 a share on revenue of $12.87 billion, up 11.8% from a year earlier and, according to IG's Chris Beauchamp, the slowest third-quarter growth in three years; the company itself forecast $12.86 billion in its July shareholder letter, along with about $3 billion of advertising sales for 2026. For the full year the consensus is $51.2 billion of revenue and $3.58 of earnings per share, which puts the stock on a forward price-to-earnings multiple of about 18.8, against a five-year average of 31. Netflix no longer discloses subscriber numbers, so the reaction will turn on revenue, operating margin and whatever it says about advertising.
The shares have become a sell-the-news stock. Netflix has fallen after each of its last five quarterly reports, including a drop of about 9% after hours in July when it beat the profit estimate by a cent and guided lower; the stock is down roughly 25% in 2026 and more than 40% over the past year, and the New York Times reported that the US subscriber base has shrunk 2% this year. The operating data behind that are the ones investors will want addressed: IG cites a 16.6% year-on-year rise in US churn last quarter, and Jefferies estimates average monthly viewing per member has fallen to 49 hours from 66 in 2023. On the other side are live sports, including the 2030 World Cup rights in Spain acquired this month, and an advertising business that is still growing.
The chart is as compressed as the valuation. Beauchamp notes that the stock held its July lows "by a whisker" in early October and would need to clear last week's high at $73 and then the February low at $75 to change the trend; the summer rally never came. A company that fires its two most senior content executives in the week before earnings is telling investors that the problem is the product, not the quarter, and the quarter is now the first evidence of what the new management inherits.
Netflix is the first of this week's large technology reports and the least exposed to the question that moved markets last week, because it is not building data centres. SpaceX reports its first full public quarter the same evening, Tesla, Meta and IBM on Wednesday. If Netflix falls for a sixth straight time on a report that matches consensus, the lesson will be about the stock's ownership, not its business.