Netflix beats Q3 estimates but shares fall as ad guidance and U.S. viewing slowdown rattle investors

Netflix posted Q3 earnings that topped estimates, but shares fell about 6% in extended trading after the company issued weak advertising and revenue guidance that exposed cracks in its growth engine.

Earnings per share came in at 87 cents versus 82 cents estimated. Revenue was $12.87 billion, in line with Wall Street projections and up 12% year over year. Net income reached $3.66 billion, compared with $2.55 billion in the same period a year earlier. Netflix said the profit jump was due in part to the timing of expenses.

Guidance cut and ad-business stumble

The company guided fourth-quarter revenue to $13.44 billion, representing more than an 11% increase, but narrowed its 2026 full-year forecast to $51.1 billion — a 13% jump over the prior year, yet on the low end of its previous range and below Wall Street’s $51.2 billion expectation per LSEG. More jarring for investors was the advertising business. Netflix lowered its full-year ad revenue guidance to roughly $2.7 billion, down from approximately $3 billion previously forecast, citing a slower-than-expected rollout of some ad product capabilities. The company also warned that fourth-quarter results would be negatively impacted by recent head count reductions, dragging operating margin down by about 120 basis points.

Co-CEO Greg Peters conceded on the earnings call that the ad business is trailing its own ambitions. “We set big growth targets for our ads business this year. We established an aggressive product road map that was consistent with that strategy. And, just note, I think that the build-out that we’ve been on is the fastest build-out of a comparable ad stack in our industry, but we are currently a bit behind our aggressive target for the year.” The ad-supported tier, which raked in $1.5 billion last year, is set to expand to 15 new countries in 2027. According to CNBC, Netflix had also announced new features for advertisers earlier Tuesday.

U.S. viewing slowdown

The viewing data underpinning investor unease is stark. A Jefferies analysis estimated that Netflix’s monthly viewing time per member dropped to 49 hours in the first half of 2026, down from 66 hours in the first half of 2023, per Reuters. Netflix accounted for 7.8% of U.S. viewing time in July, a one-percentage-point decline year over year, according to The New York Times. The Wall Street Journal reported that co-CEO Ted Sarandos complained internally that U.S.-based users have been spending less time on the service and that the platform is “short on new hit shows.” Netflix’s own shareholder letter acknowledged the worry: “We know there’s some investor concern about our view hours growth.”

Sarandos framed the U.S. situation in measured terms on the call. “Now, the US is also working. It’s just not growing as fast as it could or as fast as we’d like.” He pointed to the gap between solid performers and breakout hits: “We had some really solid doubles and triples this year, but the other territories count on some of those titles being home runs so that they’ll travel around the world. We’re focusing on that execution.” Peters noted that churn improved globally and in the U.S. for the quarter, and said the response to price hikes that took effect in March has been consistent with prior changes.

Content leadership overhaul

The viewing pressures have triggered a sweeping leadership shakeup. Last week Netflix laid off roughly 1,000 employees, about 6% of its workforce. Chief Content Officer Bela Bajaria is departing that role, and film head Dan Lin was replaced. Former Disney executive Peter Rice was appointed as the new CCO on Oct. 15 and takes over on October 26th. Sarandos said Rice “brings expertise in both art and commerce, television and film. It’s that exact skill set that will help guide us through our next chapter.”

International growth as counterweight

Outside the U.S., the picture is brighter. Q3 view hours in India grew 24% on an absolute basis, and Sarandos cited Korea, Japan, and the Nordics as also performing well. CFO Spencer Neumann said Netflix is “not overly dependent on any kind of one title, nor outsized performance by any one region to deliver healthy growth.” The shareholder letter pointed to “intense competition and an explosion of content competing for consumer attention” as the broader backdrop.

Netflix is betting on a wider content aperture to break through. The shareholder letter highlighted upcoming NFL games, a Grand Theft Auto VI preview, and a partnership with French broadcaster TF1. YouTube has reportedly offered channels millions of dollars not to post their videos on Netflix, and Netflix has weighed integrating third-party streamers such as Peacock and Fox One, as well as adding always-on channels.