By Lisa Richwine and Jaspreet Singh
LOS ANGELES, Oct 20 (Reuters) – Netflix issued weaker-than-expected guidance for fourth-quarter profit and cut its full-year advertising forecast on Tuesday, days after the streaming pioneer laid off 6% of its workforce and replaced two of its top programming executives.
Shares of Netflix fell nearly 6% to $64.66 in after-hours trading. The stock had fallen more than 40% in a year before the earnings report.
Co-CEO Ted Sarandos said the company plans to focus on its core business of producing quality TV shows and movies to make Netflix a must-have service, and the recent executive shakeup was a step toward that goal.
“I know that we could do better,” Sarandos said in a post-earnings video call. “Now we’ve seen an opportunity to take our slate to the next level.”
Third-quarter revenue rose 11.8% to $12.87 billion, in line with Wall Street forecasts, but the lowest rate of increase in nearly three years. The company forecast fourth-quarter net income of $2.79 billion and EPS of 67 cents, below the average analyst forecast of $3.07 billion and 73 cents.
Netflix reduced its advertising forecast for 2026 to roughly $2.7 billion, down from about $3 billion. Some ad product capabilities rolled out slightly slower than expected, executives said in their quarterly letter to shareholders.
The company that shook up Hollywood when it started streaming TV shows and movies two decades ago is now competing with a surge in viewership on YouTube and TikTok. Netflix has invested in video games, podcasts and live events to draw new viewers and increase the time members spend on the platform.
Wall Street analysts have questioned how the company will kick-start growth.
“Netflix remains a well-oiled, highly profitable machine, but focused on too many unwanted distractions,” PP Foresight analyst Paolo Pescatore said. “The company needs to get back to basics and focus on compelling content.”
In its earnings report, Netflix said it would continue to expand its offerings through licensing more third-party content.
For the third quarter, earnings per share came in at 87 cents, ahead of the 82-cent average forecast of analysts surveyed by LSEG. New programming during the quarter included “Monster: The Lizzie Borden Story,” the second season of “The Gentlemen,” the final installment of “Outer Banks” and a reboot of “Little House on the Prairie.”
Last week, Netflix laid off 1,000 people, or about 6% of its employees. The company replaced Chief Creative Officer Bela Bajaria and said film chief Dan Lin was departing, signs that it is resetting its programming strategy.
The company named former Disney and Fox executive Peter Rice to replace Bajaria. He also will oversee the film division until a replacement for Lin is chosen.
“Peter Rice understands talent relations, and in a competitive market, creative talent have choices of where they want to work,” Sarandos said on Tuesday. “We want Netflix to always be the place that they love to do the best work of their life.”
Earlier this year, Netflix lost a bidding war for Warner Bros Discovery and its rich library of characters, which was sold to David Ellison-led Skydance. Some analysts believe Netflix could go after other acquisition targets such as NBCUniversal after Comcast spins it off.
Netflix has posted monthly subscriber losses in the US throughout 2026, with no net additions reported for any month up to September, data from analytics firm Antenna showed.
Antenna tracks US subscription purchases via sources like credit card transactions, but excludes subscriptions acquired through wholesale bundles. A Netflix spokesperson said the Antenna data were “not representative of Netflix’s business performance.”
Sarandos said there was no need for a “fundamental shift” in strategy but added: “We do need better execution in the US.”
(Reporting by Lisa Richwine in Los Angeles; Additional reporting by Jaspreet Singh in Bengaluru;Editing by Aurora Ellis)
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