Netflix's stock fell by more than 5% on Tuesday after its third-quarter earnings report did little to calm investor nerves over a slowdown in viewer engagement and revenue growth. The California-based streaming service, which has become a global entertainment powerhouse, acknowledged the concerns in a letter to shareholders, saying it was "confident" it could accelerate growth in viewing hours.
The company has faced mounting pressure from competitors in streaming, gaming, and sports, and its shares have underperformed significantly over the past year. John Belton, a portfolio manager at Gabelli Funds, told AFP that investors are worried about "soft engagement trends, decelerating revenue growth, a slower margin expansion outlook, and most recently content executive leadership changes."
Earnings and engagement
In the third quarter ending in September, Netflix reported revenue of $12.87 billion (€11.09 billion) and net income of $3.7 billion (€3.19 billion), both slightly above analyst expectations, according to FactSet. However, the company did not disclose overall subscriber viewing hours for the quarter, though it noted a 24% year-on-year increase in India.
In July, Netflix revealed that subscribers had spent 97 billion hours watching content in the first half of the year, a modest 2% increase compared with the same period in 2025. The company stopped reporting subscriber numbers earlier this year, a move that has left investors with fewer metrics to gauge growth.
Co-CEO Ted Sarandos acknowledged that the US market needs better execution, while highlighting strong performance in Latin America, Europe, and Asia. "The US is also working. It's just not growing as fast as it could or as fast as we'd like," he said during an analyst call.
Job cuts and leadership changes
According to media reports, Netflix is planning to cut about 6% of its workforce, or roughly 1,000 jobs. The Hollywood Reporter said seven senior executives responsible for television deals and content were among those let go. The company has also replaced its chief content officer, Bela Bajaria, who oversaw hits like Stranger Things, Bridgerton, and Squid Game, with former Disney executive Peter Rice.
Sarandos defended the appointment, saying, "Peter Rice understands talent relations, and in a competitive market, creative talent have choices of where they want to work."
Diversification and competition
To counter intensifying competition, Netflix has expanded into live sports, securing rights to major events like the Olympics and the World Cup, as well as NFL and WWE broadcasts. It has also invested in gaming and shorter-form content. In the US, Netflix captured 7.8% of streaming television viewers in July, compared with YouTube's record 14.2%, according to Nielsen.
Despite these efforts, the company missed expectations on advertising revenue growth. Co-CEO Greg Peters acknowledged, "We are currently a bit behind our aggressive target for the year. We're still growing" on advertising, and pointed to new ad formats as a potential driver.
Netflix's recent acquisition of World Cup broadcast rights for Spain and Andorra underscores its push into live sports, a strategy that could help attract new subscribers in Europe. The company's global footprint remains strong, but investors are watching whether it can sustain growth in mature markets like the US.
As the streaming landscape becomes more crowded, Netflix's ability to retain both paid and ad-supported members will be crucial. The company insists that its core focus on traditional television and film remains intact, with Sarandos noting that "roughly 95% of our spend and nearly all of our revenue is focused on that core."
For European audiences, Netflix's challenges reflect broader shifts in media consumption, where competition from local players and tech giants is intensifying. The company's performance in markets like Germany, France, and the Nordics will be key to its future growth, as it seeks to balance global ambitions with local content investments.
