Netflix shares drop on slowing engagement, revenue growth

On Tuesday, Netflix's shares experienced a sharp decline of over five percent following the release of its quarterly earnings report. The company's report did little to alleviate investor apprehensions regarding the slowing engagement of viewers and the decline in revenue growth. In a letter to investors, Netflix acknowledged investor concerns about the rate of growth in view hours, assuring them that the company is confident in its ability to accelerate that growth.

The streaming giant has faced challenges in meeting investor expectations for several consecutive quarters due to intense competition from other streaming services, gaming platforms, and sports organizations. In the third quarter, which concluded in September, Netflix reported revenue of US$12.87 billion and net income of US$3.7 billion, exceeding investor projections.

However, the company refrained from disclosing overall figures for subscriber viewing hours during the quarter, noting that the metric increased by 24 percent in India compared to the same period in 2025. In July, Netflix disclosed that subscribers had spent a total of 97 billion hours watching content, marking a two percent increase from the first half of 2025.

Despite the global success of Netflix's content, the company recognized that it needs to improve its performance in the US market. CEO Ted Sarandos emphasized that while the company's content offerings are performing well overseas, the US market is not growing as rapidly as desired. As a result, Netflix announced plans to cut around six percent of its workforce, or approximately 1,000 jobs, including seven senior employees responsible for television deal negotiations and content acquisition.

Additionally, the company recently replaced its chief content officer, Bela Bajaria, who oversaw popular shows such as "Stranger Things," "Bridgerton," and "Squid Game," with former Disney executive Peter Rice. Competing with other streaming services, Netflix has expanded its offerings to include live sports, gaming, and shorter-form content to attract and retain subscribers.

In the US, Netflix accounted for 7.8 percent of streaming television viewership in July, surpassing YouTube's 14.2 percent, a record for the Google-owned platform. The World Cup's popularity boosted overall television viewership in July, according to Nielsen. Sarandos reiterated Netflix's dedication to traditional television and film content, stating that roughly 95 percent of the company's investment and revenue is focused on this core area, which holds significant potential for future growth.

The company also fell short of expectations regarding advertising revenue growth, acknowledging that it is currently behind its aggressive annual target. However, Netflix's co-chief executive, Greg Peters, stated that the company is still experiencing growth in advertising, attributing this progress to the introduction of new ad formats, which contribute to the company's growth trajectory.