Netflix Shares Fall 6% as Ad Revenue Outlook Gets Cut to $2.7 Billion

Netflix shares dropped nearly 6% in after-hours trading on Tuesday after the company cut its 2025 ad-revenue forecast to roughly $2.7 billion, down from prior expectations of about $3 billion.

The downgrade came alongside a soft fourth-quarter outlook. Netflix guided to Q4 revenue of $13.44 billion and earnings of 67 cents a share, below FactSet consensus of $13.52 billion and 73 cents. For the full year, the company expects $51.1 billion in revenue — just under analysts' $51.21 billion forecast and slightly below the midpoint of its own earlier guidance.

Management blamed the ad shortfall on a "slightly slower-than-expected rollout of some ad-product capabilities." For a company under pressure to build revenue beyond subscriptions, that cut stung. "With Netflix under pressure to find alternative lines of revenue beyond subscriptions, it's concerning that the company lowered its estimate for its ad business," eMarketer analyst Ross Benes said in emailed remarks. "Revamping content strategy is not enough to fix this challenge but it is a worthwhile start."

The stock is now down 26.7% year to date.

What did the quarter itself deliver?

The actual numbers were fine. Netflix reported third-quarter revenue of $12.874 billion against FactSet forecasts of $12.869 billion, with growth driven by price increases. Earnings came in at 87 cents a share, beating estimates of 82 cents.

The problem sits ahead, not behind. In its letter to shareholders on Tuesday, management flagged "intense competition" and acknowledged "some investor concern about our view-hours growth." It added that members' responses to this year's higher subscription prices are "consistent with prior price changes and our expectations," a signal that engagement remains healthy.

How does Netflix plan to fix viewership?

Executives spent the earnings call defending the strategy. Co-CEO Ted Sarandos said the company's overall plans are unchanged, pushing back on analysts who worry that Netflix's expansion into podcasts, games and live events has come at the expense of the shows and films people actually want to watch. Original series and films remain at the heart of the plans, he said, and the live-events push helps Netflix stand out as streaming options proliferate.

"We've oriented the market to expect something great and new to watch every week, so we have to deliver on quality and quantity always," Sarandos said.

To lift hours watched, Netflix plans to expand access through licensing and by bringing more third-party programming onto its platform — including its partnership with TF1, the French TV network.

Co-CEO Greg Peters said U.S. engagement was solid but had room for improvement. He pointed to a slate designed to pull viewers back, including:

• Holiday-season NFL games
• The final season of "Emily in Paris"
• The David Fincher and Quentin Tarantino film "The Further Mis-Adventures of Cliff Booth," starring Brad Pitt

What's the backdrop for the cuts?

The call came roughly a week after Netflix said it would cut about 1,000 jobs, or around 6% of its staff, amid worries about waning viewership, competition from short-form video providers and pushback to recent price increases. Management said on Tuesday that those job cuts will weigh on margins.

Investor nerves have been frayed since the summer, when Netflix said it would publish some viewership data less frequently. Some analysts, though, argue the company remains globally large enough to weather dry spells in the U.S.

The takeaway: a beat on Q3 earnings didn't buy Netflix much goodwill. With the ad business trimmed, margins squeezed by layoffs and view-hours growth in question, the next test is whether the NFL slate and a Tarantino film can turn hours watched — and the stock — back around.