Netflix Stock Slides 6% as Ad Forecast Falls After 1,000 Job Cuts

• Netflix stock fell about 6% after hours as weaker guidance overshadowed its Q3 earnings beat
• Netflix cut its annual advertising revenue forecast by 10% to $2.7 billion from $3 billion
• Roughly 1,000 job cuts and a content leadership shake-up put Netflix’s growth strategy under scrutiny

Netflix delivered more profit than Wall Street expected, but investors found little reason to celebrate. Netflix stock fell about 6% in after-hours trading following its October 20 earnings release, adding pressure just days after the company announced roughly 1,000 job cuts. The results showed a business still growing and generating substantial cash. Yet the Netflix earnings report also exposed a problem that stronger quarterly profits could not settle. Whether its next growth drivers are delivering.

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Netflix’s Advertising Forecast Takes a $300 Million Hit

The disappointment came in the outlook. Netflix advertising revenue is now expected to reach approximately $2.7 billion this year, down from an earlier projection of roughly $3 billion. That amounts to a 10% reduction.

In its third-quarter shareholder letter, Netflix attributed the change to a slower-than-expected rollout of some advertising capabilities. Subscription revenue growth had exceeded its expectations, but the advertising shortfall left its $51.1 billion annual revenue forecast slightly below the midpoint of its previous range.

The fourth-quarter earnings outlook added to the concern. Netflix projected earnings of $0.67 per share, below analysts’ expected $0.73. Revenue guidance was approximately $13.44 billion.

Those forecasts overshadowed a respectable quarter. Netflix revenue increased approximately 12% to $12.87 billion, while earnings reached $0.87 per share against expectations of $0.82. Its operating margin climbed to 34.6% from 28.2% a year earlier.

There was a qualification behind that margin improvement. Netflix said the result exceeded its forecast primarily because of expense timing. Investors therefore had reason to look beyond the headline profit beat when assessing the next quarter.

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Netflix Layoffs Put Its Spending Choices in Focus

The Netflix layoffs preceded the results. On October 14, it was reported that approximately 6% of employees would lose their jobs, with the largest impact across product, technology, legal, and human resources.

Co-CEOs Greg Peters and Ted Sarandos told staff the business remained strong, while emphasizing discipline in allocating people and resources. The cuts were the company’s largest since 2022. Announced after September ended, they do not explain the third quarter’s higher margin.

Netflix is also changing its programming leadership. Former Disney executive Peter Rice is scheduled to replace Bela Bajaria as content chief on October 26.

For NFLX stock, the next test is whether those changes translate into stronger engagement and advertising sales. The latest quarter demonstrated Netflix’s ability to produce profit. Its reduced outlook left investors questioning how quickly the business can grow from here.

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