On Thursday, Netflix shared its projections for revenue and profits for the third quarter, which fell short of Wall Street expectations. The streaming giant indicated that it plans to cut back on the details it shares about viewing hours, as it looks for new growth paths in an increasingly competitive media landscape.
Following the announcement, Netflix’s stock dropped nearly 8% in after-hours trading, bringing it down to $68.45.
The company’s forecast includes anticipated sales of $12.86 billion alongside diluted earnings per share of 82 cents for the July-September timeframe. This contrasts with analyst predictions of $13 billion in sales and 84 cents in diluted EPS, per LSEG data.
PP Foresight analyst Paolo Pescatore noted that the third-quarter expectations appear to reflect management’s cautious approach, as well as a natural slowdown in growth rather than a sudden performance decline. He added that while Netflix continues to do well, its history of high expectations leaves little room for errors, suggesting a shift toward a more stable growth phase.
Netflix also mentioned that it will limit its biannual viewing time report to just once a year starting January 2027, to better concentrate on primary financial metrics such as revenue and operating profit. The company had already ceased quarterly subscriber updates in 2025.
In the recently concluded quarter, Netflix’s revenue and earnings per share were mostly in line with what analysts had forecasted. EPS stood at 80 cents during this period, which featured popular releases like the crime drama “I Will Find You” and the animated film “Swapped.” Sales totaled $12.56 billion.
In a letter to shareholders, the company expressed that its financial performance remains strong and that it’s on target to meet its goals for the year.
Intensifying competition
Netflix is facing competition from various sectors of the entertainment industry, including traditional media giants like Walt Disney Co. and the increasing appeal of mobile viewing on platforms such as TikTok.
Before the earnings report, Netflix had seen its market value drop by over 20%, as investors grew concerned about the company’s ability to sustainably increase revenue and attract new subscribers. As of April, Netflix reported more than 325 million paid subscribers, hinting at additional growth potential.
The company is developing its advertising segment and venturing into video games, but these efforts are still in their nascent stages. Netflix has maintained its forecast that advertising revenue will hit $3 billion by year-end. Additionally, it anticipates that a rise in live events, particularly an expanded NFL schedule, will help boost advertising revenue.
Netflix stated that user engagement—essentially, the time people spend watching its content—is currently “healthy.” In fact, viewing time rose by 2% in the first half of this year, up from 1.5% during the same period last year.
The company aims to outpace competition by utilizing technology to enhance all facets of its operations. It also noted that the use of generative artificial intelligence by producers is growing rapidly, currently applied in about 300 titles, mainly during post-production.
