The streaming company projected $12.86 billion in third-quarter revenue and earnings of 82 cents per share, both slightly below analysts’ estimates, as Netflix moves into what one analyst described as a steadier phase of growth.
By yourNEWS Media Newsroom
Netflix shares dropped nearly 9% in after-hours trading July 17 after the streaming giant issued third-quarter revenue and earnings projections that fell short of Wall Street expectations.
The company, led by co-CEOs Ted Sarandos and Greg Peters, said July 16 that it expects to generate $12.86 billion in revenue from July through September, with diluted earnings of 82 cents per share.
Analysts surveyed by LSEG had projected $13 billion in revenue and diluted earnings of 84 cents per share.
The weaker-than-expected forecast prompted an immediate decline in Netflix’s share price, which had already fallen more than 20% since the beginning of the year as of July 17.
Netflix is seeking additional growth through advertising, live programming and video games while continuing to expand its global audience.
Chief Financial Officer Spencer Adam Neumann said the company remains positioned to deliver substantial full-year revenue growth despite the muted third-quarter outlook.
“We expect to deliver another strong year with, as we saw, as you see in the guide, 13 percent to 14 percent top-line growth for the full year,” Neumann said.
He said Netflix now entertains an audience approaching 1 billion people but remains far from saturating its potential global market.
“We’re entertaining an audience approaching 1 billion people with still lots of room to grow into our addressable market on every measure,” Neumann said. “We’re under 45 percent penetrated into addressable households around the world. It’s roughly 800 million addressable households.”
Netflix also estimates that its programming accounts for only a small share of worldwide television viewing.
“We’re only about 5 percent of TV view share globally,” Neumann said.
PP Foresight analyst Paolo Pescatore said the third-quarter projections appeared to reflect management caution and the natural slowing of a more mature company rather than a sudden weakening of Netflix’s operations.
The forecast numbers “appear to reflect a combination of management caution and a naturally maturing growth profile, rather than any sudden deterioration in the business,” Pescatore said.
He added that the results would “reinforce the view that Netflix remains strong but is entering a steadier phase of growth with considerably less room for error given the always-high expectations.”
Netflix reported second-quarter revenue and earnings that were approximately in line with analyst projections.
Earnings reached 80 cents per share for the recently completed three-month period, while revenue totaled $12.56 billion.
The quarter included popular releases such as the crime drama “I Will Find You” and the animated feature “Swapped.”
“Our financial performance remains solid and we’re on track to meet our objectives for the year,” Netflix said in its quarterly letter to shareholders.
The company is also reducing the frequency of some disclosures as it seeks to direct investors’ attention toward revenue and operating profit.
Netflix said it will begin publishing its viewing-hours report once annually starting in January 2027, rather than twice each year.
The company said the change was intended “to keep the focus on our primary financial metrics — revenue and operating profit.”
Netflix stopped reporting quarterly subscriber totals in 2025. Subscriber growth had long been one of the streaming industry’s most closely watched performance measures.
The decision reflects Netflix’s effort to shift investor attention away from raw membership numbers and toward the amount of revenue and profit generated by its audience.
Netflix continues to face intense competition from other major entertainment companies, including Walt Disney Co., which is also working to expand its streaming operations and reduce its dependence on traditional television.
Disney CEO Josh D’Amaro outlined his strategy for the company during a May 6 earnings call, his first since taking the top position.
“Our focus remains consistent—improve the consumer experience, deepen engagement, and continue building a healthy and more durable growth business,” D’Amaro said.
D’Amaro succeeded Bob Iger as Disney’s chief executive in mid-March.
Disney reported adjusted earnings of $1.57 per share and $25.2 billion in revenue for the January-through-March quarter.
Analysts surveyed by LSEG had expected adjusted earnings of $1.49 per share and revenue of $24.78 billion.
Operating income within Disney’s entertainment division rose 6% to $1.34 billion.
The increase was driven partly by higher subscription and advertising revenue from streaming services, including Disney+.
Movie releases “Zootopia 2” and “Avatar: Fire and Ash,” which debuted the previous year, continued contributing to Disney’s quarterly performance.
Disney Chief Financial Officer Hugh Johnston said investors should view the company’s television networks, including ESPN, as brands supported by studios that produce programming capable of being distributed across multiple platforms.
He cited “The Bear” as an example of content that can be broadly distributed and monetized.
Johnston said Disney’s streaming operations now produce twice the revenue of its traditional television business, which is becoming “smaller and smaller every quarter.”
The growing importance of streaming places Netflix and Disney in direct competition for subscribers, viewing time, advertising revenue and premium programming.
Netflix’s expansion into advertising, live events and gaming is intended to create new revenue streams as subscriber growth becomes less central to the company’s financial reporting.
Its third-quarter guidance, however, showed that even modest misses can trigger a sharp market reaction when investors have high expectations for the industry leader.
Although Netflix’s recent quarterly performance remained broadly consistent with forecasts and management maintained its full-year growth outlook, the nearly 9% after-hours share decline demonstrated investor concern over the company’s ability to continue exceeding expectations as its business matures.
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