Full Breakdown
Netflix Faces Slower Revenue Growth Amid Leadership Shake-up and Viewer-Engagement Concerns
By Drooid · · How we work
Slowing Revenue Growth and Revised Outlook
Netflix reported third-quarter revenue of $12.9 billion, a 12 % increase from the same period a year earlier—the smallest quarterly revenue growth in three years. Net income rose 44 % to $3.66 billion. Despite the rise, the streamer issued a weaker-than-expected forecast for the fourth quarter and lowered its projected 2026 ad-revenue target to $2.7 billion, down from an earlier estimate of roughly $3 billion. The company still expects full-year 2026 revenue of $51.1 billion, representing a 13 % year-over-year increase. In after-hours trading, Netflix shares fell nearly 6 %, adding to a decline of more than 40 % over the past year.
Leadership Overhaul and Cost-Cutting
In response to the performance slowdown, Netflix eliminated roughly 6 % of its workforce—about 1,000 jobs—including the departure of content chief Bela Bajaria, who had overseen hits such as “Bridgerton,” “Squid Game,” and “Stranger Things.” Film-unit head Dan Lin also left. Former Disney and Fox executive Peter Rice was appointed chief content officer, tasked with managing a $20 billion content budget and steering a shift toward larger theatrical releases for select films. Co-CEOs Ted Sarandos and Greg Peters communicated the restructuring plan, dubbed “Project Meridian,” to affected employees.
Viewer Engagement Challenges
Company officials highlighted declining average viewing hours among U.S. audiences, noting that the platform has not added new domestic subscribers this year, according to analytics firm Antenna. Netflix disputed Antenna’s figures, asserting they misrepresent the business. Sarandos emphasized the need for new hit shows and expressed concern over competition from short-form platforms such as YouTube and TikTok. The firm also pointed to modest success in emerging formats, including live sports, video podcasts, and gaming, while acknowledging that gaming engagement remains limited.
Financial Metrics and Market Reaction
Operating margins are projected around 31.5 %, and the September cancellation rate stood at 2.1 %. Analysts have questioned how Netflix will reignite growth in view hours, especially after a failed attempt to acquire Warner Bros. Discovery’s studios and HBO Max. The company’s letter to shareholders reaffirmed confidence that view-hour growth can be accelerated, even as it seeks to balance subscription and advertising revenue streams.