Netflix released its third-quarter earnings on Tuesday, October 20, and while the headline numbers cleared expectations, investors looked past them, and its shares fell in after-hours trading.
Netflix Beats Estimates, Then Loses Ground on Its Advertising Forecast
Netflix reported third-quarter earnings per share of $0.87, ahead of Wall Street’s expectations, on revenue of $12.87 billion that matched the consensus estimate. This reported revenue, an increase of approximately 11.8% from a year earlier, pushed analysts’ average earnings forecast of $0.82 per share.
However, the stronger earnings figures were not enough to relay enthusiasm from investors. Netflix shares fell more than 5% in after-hours trading following the announcement, as attention shifted from its latest performance to what the company expects in the months ahead. Share price dropped in extended trading to $64.62, following a regular-session decline of 1.71% that saw it close the day at $68.69, almost 6% below its most recent October high of $73.07.
Speaking of what to expect in the months ahead, Netflix forecast fourth-quarter earnings of $0.67 per share, below the $0.73 anticipated by analysts. More significantly, the company reduced its projected advertising revenue for 2026 to approximately $2.7 billion from an earlier estimate of around $3 billion, citing a slower-than-expected rollout of some advertising product capabilities.
Netflix's share price has been a weak spot for some time. The stock had fallen after each of its previous five earnings reports, and the price was down about a quarter from its 2026 high of $107.79 in April going into Tuesday’s report.
The report followed a week of upheaval at Netflix, with the streaming and entertainment company recently announcing workforce reductions affecting about 1,000 employees and changes to its senior content leadership. The restructuring is expected to reduce the fourth-quarter operating margin by about 120 basis points, to a forecast of 26.0%.
Meta and Tesla Face Their Own Tests
Netflix is not the only major technology company facing difficult questions from investors. Meta Platforms and Tesla are scheduled to report their third-quarter results on October 21 after the U.S. stock market closes.
Meta Platforms, for one, will need to back up its massive AI capital expenditure, which is increasingly under observation. According to Reuters consensus data, Wall Street expects Meta Platforms to report a 23.8% increase in third-quarter 2026 revenue to $63.42 billion. However, its capital expenditure more than doubled to $41.68 billion in the September quarter.