Netflix slides as weak outlook deepens worries on viewership, revenue growth

Netflix's shares fell about 5% on Wednesday (Oct 21) after the streaming giant's weak profit outlook and cautious advertising forecast deepened worries about sluggish viewership and revenue growth. The stock has declined over 26% this year, potentially eroding about $13.4 billion in market value if losses continue. The stock slide highlights the challenges Netflix faces, including losing a bidding war for Warner Bros Discovery and competing in an increasingly consolidated streaming market.

As viewers gravitate towards free, user-generated platforms like YouTube and TikTok, Netflix must adapt to changing preferences for short-form video content. Despite reporting an 11.8% rise in third-quarter revenue to $12.87 billion, the slowest increase in nearly three years, Netflix's advertising forecast for 2026 was reduced to roughly $2.7 billion from $3 billion.

Evercore ISI analysts noted that growth has slowed at Netflix, attributing it to market maturity, competition from platforms like YouTube, Amazon, and Disney, and potential challenges from short-form content such as TikTok and YouTube. Co-CEO Ted Sarandos acknowledged that the company "could do better" during a post-earnings call.

The leadership change and workforce reductions are seen as steps to improve content output and creative hit rates. Netflix's valuation stands at nearly 18.28 times expected earnings over the next 12 months, compared to 14.76 times for Walt Disney and 6.26 times for Comcast.