Netflix loses 9% of its market capitalization: weak revenue forecast outweighs strong earnings report
Shares of streaming giant Netflix (NFLX) plunged nearly 9% in after-hours trading following the release of its third-quarter forecast. The company expects revenue of $12.86 billion, falling short of the Wall Street analyst consensus of $13 billion. Investors reacted instantly, ignoring strong second-quarter results.
Despite Netflix's net profit exceeding market expectations, overall quarterly revenue still missed forecasts. Shareholders are now cautiously assessing the slowdown in new subscriber additions. Obvious signs of slowing business growth raise questions, especially ahead of the second half of 2026.
Shares approach two-year low
On July 16, trading closed at $74.35 per share — 0.91% higher than the previous day. However, after the forecast was released, the stock plummeted 8.98% to $67.78. Since the start of the year, the share price has fallen more than 21%, and over the past twelve months, it has dropped 41%. The stock is now trading well below its all-time high of around $133, set in June 2025.
The current decline coincides with a period of general unease in the stock market, triggered by mixed earnings reports from the banking sector. Additional pressure on exchanges came from recent statements by the Federal Reserve chair regarding the future trajectory of interest rates. Against this backdrop, the tech-heavy Nasdaq and S&P 500 indices have shown increased volatility in response to corporate news.
Analysts cite slowing growth
Experts characterize the current situation as an example of "natural business maturation." This does not imply worsening prospects, but the margin for error for Netflix is now higher — market expectations for the company remain very high. The company also stated that starting January 2027, it will release viewership data once a year to focus attention on revenue and operating profit.
Netflix confirmed its intention to roughly double advertising revenue to $3 billion per year. In the first half of 2026, audience engagement grew by 2%. The company will report third-quarter results on October 20. Investors are waiting to see if Netflix can offset the slowdown in subscriber growth with a new focus on advertising and live broadcasts.
My take: The market appears to be re-evaluating Netflix as a growth story and beginning to view it as a mature player with limited audience expansion potential. The key question now is how effectively the company can monetize its existing base through advertising and premium content. If advertising revenue does not start growing at the expected pace, pressure on the stock will persist.