Netflix earnings forecast disappoints Wall Street, shares tumble
Firm says it would cut its twice-yearly release of a viewing-hours report to once a year starting in January 2027
Published Fri, Jul 17, 2026 · 09:09 AM
[LOS ANGELES] Netflix forecast third-quarter revenue and earnings on Thursday (Jul 16) that fell short of Wall Street targets and said it would cut the frequency of viewing-hours reports as the company seeks new avenues of growth.
Shares of Netflix fell nearly 8.6 per cent in after-hours trading to US$67.99.
The company led by co-CEOs Ted Sarandos and Greg Peters said it expected US$12.86 billion in revenue from July through September and diluted earnings per share (EPS) of US$0.82. Analysts had forecast US$13 billion in revenue and diluted EPS of US$0.84, according to LSEG.
After years of rapid subscriber gains, Netflix is working to grow by building advertising, live events and video games. The company’s stock has lost about a fifth of its value in 2026 as investors question how it will sustain growth.
Third-quarter projections “appear to reflect a combination of management caution and a naturally maturing growth profile, rather than any sudden deterioration in the business,” PP Foresight analyst Paolo Pescatore said.
He added that they would “reinforce the view that Netflix remains strong but is entering a steadier phase of growth with considerably less room for error given the always-high expectations.”
Netflix said it would cut its twice-yearly release of a viewing-hours report to once a year starting in January 2027 “to keep the focus on our primary financial metrics – revenue and operating profit.” It stopped publishing quarterly subscriber numbers in 2025.
For the just-ended quarter, Netflix revenue and EPS were roughly in line with analyst estimates. EPS came in at US$0.80 for the three-month period, which featured hits including crime drama I Will Find You and animated feature Swapped. Revenue totalled US$12.56 billion.
“Our financial performance remains solid and we’re on track to meet our objectives for the year,” the company said in its quarterly letter to shareholders.
Competition intensifies
Netflix is facing competition from all corners of the entertainment industry, from traditional media companies such as Walt Disney to YouTube, a growing presence in living rooms, and mobile viewing on apps such as TikTok.
In April, Netflix said it had more than 325 million paying members and still had room to increase that number.
The company is building an advertising business and offering video games, two initiatives still in the early stages. It repeated an earlier forecast that ad revenue would reach US$3 billion by the end of 2026. The company is counting on its growing number of live events, including an expanded NFL slate, to draw more advertising dollars.
On a post-earnings video, Peters said the company was considering whether to offer a free option with advertising in some markets but had no near-term plans to launch one.
Netflix said engagement, or the amount of time people spend watching the service, was “healthy.” Viewing hours grew by 2 per cent in the first half of 2026, compared with 1.5 per cent a year ago.
It said it aimed to stay ahead of the competition in part by using technology to improve all aspects of its business. Use of generative artificial intelligence by producers is “scaling quickly” and has been employed in about 300 titles, mostly in post-production, the company said. REUTERS
