Netflix pledges to revive viewing growth, but investors sell the stock

what happened

Netflix shares dropped roughly 5.6% after hours following earnings, as investors reacted to a weaker sales outlook and setbacks in the advertising business. Co-CEO Ted Sarandos said the company's overall plans were unchanged and that worldwide demand remained healthy. He argued that original shows, films and live events help Netflix stand out as streaming options multiply.

For the fourth quarter, Netflix expects revenue of $13.44 billion and earnings of 67 cents per share, below FactSet estimates of $13.52 billion and 73 cents. For the full year it forecasts $51.1 billion, slightly under the $51.21 billion analysts expected. The company also lowered its ad-sales estimate because of a slower-than-expected rollout of some ad features. Third-quarter revenue came in at $12.874 billion versus $12.869 billion forecast, and earnings were 87 cents a share against 82 cents expected.

why it matters

Netflix stock is down 26.7% so far this year, and investors are focused on viewing hours, a metric the company has disclosed less often. The recent cut of about 1,000 jobs, roughly 6% of staff, is expected to weigh on margins. For the streaming sector, the report highlights rising competition and the search for revenue beyond subscriptions.

market impact

Netflix and media stocks: a weak outlook and ad setbacks pressure streaming shares

tags

instruments