Netflix shares fell 10.8% in October while the S&P 500 slipped 0.9%. Investors weighed a Q3 report with a slower outlook, layoffs, a content leadership shake-up and signs of weaker viewer engagement.
Netflix shareholders had a tough October. The stock dropped 10.8%, according to S&P Global Market Intelligence data, while the S&P 500 edged down 0.9% over the same period.
Q3 results meet a slower outlook
The Q3 report did little to ease fears that user engagement had hit a wall. Netflix grew revenue 12% year over year to $12.9 billion, and earnings per share rose 47% to $0.87.
Investors reacted less warmly to the guidance. For Q4, management forecasts revenue of $13.4 billion, up 11.5%, and EPS of $0.67, about 20% growth. That would mark the fourth consecutive quarter of decelerating revenue growth.
Netflix also lowered its 2026 ad revenue forecast. It had expected ad revenue to double from $1.5 billion to $3 billion, but now expects $2.7 billion. Management cited "delays in the rollout and partner integration of some of those new ad products."
Layoffs and a content shake-up
Personnel moves added to the pressure. Late last month, Netflix announced plans to lay off roughly 1,000 employees, or 6% of its global workforce, the largest slate of layoffs since 2022. The company then replaced its chief content officer and film chief.
Engagement data points the same way, according to numerous reports. In July, Netflix said subscribers watched 97 billion hours of content in the first six months of 2026, up just 2% year over year. The Motley Fool's Danny Vena reads that as a sign existing viewers are watching less.
The bull case at under 19 times earnings
Vena still sees reasons for optimism. Ad revenue is expected to grow 80% in 2026, and the ad-supported tier is poised to launch in 15 new countries next year. Netflix also expects free cash flow to grow 19% this year to $12 billion.
On valuation, the stock sells for less than 19 times earnings, a multiple not seen since 2022. Vena argues that discount makes the shares a buy.
Source: The Motley Fool
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