Netflix shares fall 6% after hours as ad forecast is cut

Netflix shares fell about 6% in after-hours trading on Tuesday, October 20, 2026, after the streaming company reported third-quarter results that beat profit estimates but cut its 2026 advertising revenue forecast and put full-year revenue at the low end of its earlier range. Netflix said revenue for the July to September quarter rose about 12% from a year earlier to $12.87 billion, and its operating margin widened to 34.6% from 28.2%, according to its quarterly letter to shareholders filed with the US Securities and Exchange Commission.

This was a case where the past quarter looked good and the outlook did not. Investors buy shares for future earnings, so the cut in the advertising forecast weighed more than the profit beat. Netflix sells a cheaper plan that carries advertisements, which gives it a second source of income besides subscriptions. Advertising is meant to be one of its main growth engines in the next few years. Lowering the 2026 forecast by about $300 million, and blaming slower delivery of the tools advertisers use, raises questions about how fast that engine can grow.

The full-year revenue figure of $51.1 billion also sits at the bottom of the $51.0 billion to $51.4 billion range Netflix gave in July. That still means growth of about 13% for the year, which is strong for a company of its size, but markets had priced in more.

The fourth quarter will look weaker on paper for a known reason. The operating margin is expected to drop to 26.0%, partly because of the costs of the job cuts announced on October 14, when co-chief executives Greg Peters and Ted Sarandos told staff that about 1,000 roles, mostly in product, technology, legal and human resources, would go. In the long run the company expects those cuts to lower costs, but in the short run severance and related costs reduce profit.

For Indian investors who hold US technology and media shares, directly or through international funds, the results are a reminder that a beat on profit does not guarantee a rise in the share price when guidance disappoints. This is not investment advice.

Short-term: The after-hours fall points to a lower opening for Netflix shares on October 21, though after-hours prices can change before the regular session. Analysts will focus on the advertising business and on fourth-quarter costs.

Long-term: The path of advertising revenue and the savings from the job cuts will decide whether Netflix can keep widening its margins. The company still expects double-digit revenue growth for 2026.

Who is affected: Netflix shareholders and funds that hold the stock, advertisers and ad-technology partners, Netflix employees affected by the cuts, and rival streaming services whose valuations often move with Netflix.

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