Netflix Stock Drops On Softer than Expected Revenue Outlook -- Barrons.com

By Angela Palumbo

Netflix stock was dropping Tuesday night after the streaming giant reported better-than-expected fiscal third-quarter earnings but provided a disappointing revenue forecast.

The streaming giant reported fiscal third-quarter adjusted earnings of 87 cents per share on revenue of $12.9 billion. Analysts surveyed by FactSet expected the streamer to post adjusted earnings of 82 cents per share on revenue of $12.9 billion.

Moreover, the company also said it expects fourth-quarter revenue of $13.4 billion, which is below Wall Street estimates of $13.5 billion.

The stock dropped 4.4% in after-hours trading following the results.

This is breaking news. Please come back for more updates and analysis and read below for a preview of the earnings.

Netflix is scheduled to report fiscal third-quarter financial results after the stock market closes on Tuesday and the streaming giant has a lot to prove. Analysts surveyed by FactSet expect the streamer to post adjusted earnings of 82 cents per share on revenue of $12.9 billion, a 12% increase from revenue of $11.5 billion that Netflix reported the same time last year.

But double-digit revenue growth won't be enough to boost investor sentiment following a challenging year for the stock. Shares have fallen 26% in 2026 and are on pace for their worst year since 2022 when they fell 51%, according to Dow Jones Market Data.

Shareholders want to see how management plans to achieve sustainable engagement growth as viewership concerns mount.

Netflix is operating in its most competitive streaming environment so far. Disney+, Amazon Prime, and Alphabet's YouTube are just a few of the streaming services that take viewership time away from Netflix. And earlier this month, Paramount Skydance and Warner Bros. Discovery closed their merger, which brought the Paramount+ and HBO Max streaming services under one roof.

In July, Netflix said that it would start publishing its engagement report once instead of twice a year. Between the increasingly competitive streaming environment and Netflix's change to how often it shares engagement updates, investors have grown increasingly concerned about viewership trends.

Evercore ISI analyst Mark Mahaney said in a research note on Oct. 16. that going into the earnings report one of the key questions from analysts and investors will be "is engagement softness becoming a revenue problem?"

Netflix has acknowledged engagement concerns. Co-CEO Ted Sarandos said in a Bloomberg interview at the end of September that "overall, we're not growing as fast as I want us to." And on Oct. 14, Netflix confirmed to Barron's that the company would be cutting 6% of its staff, but remains on track to deliver its full-year forecast.

Netflix is spending heavily on content to try to combat these issues. The company is also hosting more live content, like sporting events, as it looks to attract and retain a wider audience. Netflix also said last week that former Walt Disney executive Peter Rice would join as its chief content officer, effective Oct. 26.

Tuesday's earnings give Netflix an opportunity to show that it is taking the necessary steps to improve engagement trends. It can't afford to do less.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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October 20, 2026 16:11 ET (20:11 GMT)