What happened?
Shares of streaming video giant Netflix (NASDAQ: NFLX) fell 6.4% in the pre-market session after the company lowered its 2026 advertising revenue forecast and projected decelerating fourth-quarter growth.
The streaming service reported third-quarter revenue of $12.87 billion (inline with expectations) and diluted earnings per share of $0.87 vs analyst estimates of $0.82 (5.8% beat). It guided fourth-quarter revenue to $13.44 billion (below analyst estimates of $13.51 billion) and diluted earnings per share to $0.67, missing analyst estimates by 7.9%. In addition, management cut its 2026 advertising revenue outlook from around $3 billion to $2.7 billion due to slower rollouts of advertising capabilities.
On the earnings call, co-CEO Greg Peters emphasized that advertising revenue is still expanding over 80% this year, but acknowledged the company fell behind internal targets because of delays in rolling out ad tech features and partner integrations. Peters added that the monetization gap between ad-supported and standard tiers continues to narrow as advertiser demand broadens, while CFO Spence Neumann noted that the organizational restructuring creates an approximate 120-basis-point operating margin drag in the fourth quarter.
After the initial drop, the shares shed some of the losses and rose to $66.53, down 3.3% from the previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Netflix? Access our full analysis report here, it’s free.
What is the market telling us
Netflix’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock gained 10.4% on the news that the company walked away from a high-stakes bidding war for Warner Bros. Discovery, a move investors viewed as a sign of financial discipline. The streaming service showed restraint and did not raise its offer in response to a higher bid from rival Paramount. According to a joint statement from co-CEOs Ted Sarandos and Greg Peters, the price required to match the competing offer made the deal financially unattractive. Investors reacted with relief, interpreting the decision as a responsible financial strategy and a focus on long-term profitability rather than a missed opportunity. This positive sentiment reflected the view that Netflix had avoided overextending itself on a massive buyout.
Netflix is down 26.9% since the beginning of the year, and at $66.53 per share, it is trading 46.4% below its 52-week high of $124.14 from October 2025. Despite the year-to-date decline, investors who bought $1,000 worth of Netflix’s shares 5 years ago would now be looking at an investment worth $1,019.
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