Netflix shares fall almost 4% despite strong profit as ad revenue outlook is cut

what happened

Streaming leader Netflix reported higher quarterly profit, but its shares fell to 65.84 dollars at 10:15 a.m. ET on October 21, losing nearly 4.2%. According to GuruFocus, third-quarter revenue rose 11.8% to 12.87 billion dollars, while operating margin climbed to 34.6% from 28.2% a year earlier.

The company acknowledged that much of the margin gain reflected the timing of expenses. The main weak spot is advertising: Netflix cut its 2026 ad revenue forecast to roughly 2.7 billion dollars from 3 billion, a 10% reduction, blaming slower rollout of some ad features. Subscription revenue beat expectations and partly offset the shortfall.

For the fourth quarter, Netflix expects revenue of 13.44 billion dollars and roughly 51.1 billion dollars for the full year.

why it matters

Investors now focus on whether Netflix can turn its advertising investments into revenue and sustain profit growth once the expense-timing benefit fades. GuruFocus notes the shares trade about 36% below its displayed GF Value estimate of 103.48 dollars, though the gap is not a guarantee of a rebound.

market impact

Netflix and streaming sector: weaker ad outlook pressures the company's shares

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