Netflix shares fell sharply on Wednesday despite a third-quarter earnings beat, as a softer revenue outlook and lowered advertising guidance reignited concerns about the streaming giant’s growth trajectory. Netflix reported adjusted earnings of $0.87 per share on revenue of $12.9 billion, exceeding the $0.82 per share consensus estimate, but its fourth-quarter revenue forecast of $13.4 billion came in below Wall Street's $13.5 billion expectation. The stock dropped 4.48% and is down 27% year-to-date in 2026, while Q3 revenue growth of 11.8% marked its slowest pace in nearly three years.
Adding to pressure, Netflix lowered its 2026 advertising sales guidance to at most $3 billion. Investors are scrutinizing viewer engagement as competition from Disney+, Amazon Prime Video and YouTube intensifies. Netflix also shifted its engagement report to annual publication, and in its shareholder letter acknowledged concerns about viewing-hour growth, though it said member responses to 2026 price increases were consistent with expectations.
Analyst reactions were divided. Morningstar called the drop the best buying opportunity in years, keeping an $80 target. Needham downgraded Netflix to Hold from Buy, citing decelerating FX-neutral revenue growth from 14% in Q1 to 11% in Q3 and a likely single-digit pace in fiscal 2027. Bernstein, Rosenblatt and Barclays all cut price targets, while JPMorgan, Bank of America, Goldman Sachs and Morgan Stanley defended the subscription business, international scale and long-term double-digit growth potential.
Speaking on CNBC, industry executive Tom Rogers argued that Netflix's biggest entertainment budget may no longer be decisive. He pointed to YouTube engagement, creator videos and potential AI-generated entertainment as lower-cost competitive threats. Rogers also suggested a heavier push into expensive sports rights could dilute Netflix's spending edge, while noting non-English international content now accounts for about a third of viewing and remains a key strength.
