Netflix cuts 6% of staff and trims its ad forecast, sending shares lower after a profit beat

Netflix reported higher profits than Wall Street expected for July-September, but its shares fell after the close on Tuesday as the company lowered its advertising forecast, guided to a slower end to the year and said it would cut 6% of its workforce.

Revenue rose 11.8% to $12.87 billion, almost exactly in line with forecasts. Operating income came in at $4.46 billion, a margin of 34.6%, up from 28.2% a year earlier and ahead of the company’s own 33.2% guidance. Net income was $3.66 billion, or 87 cents a share, against expectations of 82 cents.

“Operating margin was 34.6%, up from 28.2% in Q3’25 and ahead of our forecast primarily due to the timing of expenses,” Netflix said in its letter to shareholders.

Where the outlook fell short

The disappointment lay in the months ahead. Netflix now expects advertising revenue of about $2.7 billion this year, down from about $3 billion, blaming a “slightly slower than expected rollout of some ad product capabilities”. Advertising has still grown more than 80% this year.

For October-December it forecast revenue of $13.44 billion, up 11.5%, a slowdown from 17.6% growth a year earlier, and an operating margin of 26%. It narrowed its full-year revenue forecast to $51.1 billion, the bottom of its earlier range of $51 billion to $51.4 billion. Free cash flow for the year is now expected at about $12 billion, from $12.5 billion.

Co-chief executive Greg Peters admitted the company was “currently a bit behind our aggressive target for the year”, but argued for patience. “We strongly believe that a modest short-term hit for a better long-term strategic position is a good ultimate trade-off,” he said.

Job cuts and a new content chief

The 6% reduction in staff is Netflix’s largest since 2022 and will lower its fourth-quarter margin by about 1.2 percentage points. “We do not take these decisions lightly,” Peters said.

The company is also reshaping its content leadership. Chief content officer Bela Bajaria and film chief Dan Lin are leaving, and Peter Rice, a former Disney and Fox executive, will oversee content strategy. “Peter is the exact right person to lead those efforts in the U.S. and around the world,” said co-chief executive Ted Sarandos, who added that engagement was “solid” but “we know that we can do better”.

Netflix said subscribers had taken this year’s price rises in their stride. It plans to launch its cheaper ad-supported plan in 15 more countries from March 2027.

How the market reacted

The shares closed the regular session 1.7% lower at $68.66 and fell between 4% and 6% in after-hours trading. They have lost 44% over the past year. Netflix was the first of the big technology companies to report this quarter; Tesla and Meta follow on Wednesday.