Netflix Cuts Ad Revenue Forecast by $300 Million Despite Earnings Beat
Netflix reported third-quarter earnings after hours on Tuesday with a mixed performance. While the company beat expectations for earnings per share and matched revenue forecasts, it cut its ad revenue guidance from $3 billion to $2.7 billion due to slower-than-expected rollout of some advertising features. The stock fell 6% in after-hours trading as investors remained concerned about weak engagement metrics and a slowdown in top-line growth—the slowest in three years. Advertising was expected to be a key driver for Netflix's future revenue, especially with the subscription business maturing in core markets like the U.S., but this guidance cut has raised questions. Although advertising currently accounts for less than 6% of total revenue and is not yet critical to overall performance, its underperformance adds pressure on management to demonstrate progress. The company now needs to show Wall Street that it can reverse declining engagement trends or face continued skepticism from investors.