Streaming giant Netflix (NFLX) faced a sharp sell-off after releasing its third-quarter forecast. The company expects revenue of $12.86 billion, which fell short of the consensus forecast from Wall Street analysts who anticipated $13 billion. The market reaction was immediate: in after-hours trading on the evening of July 16, shares lost nearly 9% of their value, plummeting to $67.78.
This decline completely erased the positive effect from a strong second-quarter report. Despite the company's net profit exceeding expectations, overall quarterly revenue slightly missed forecasts. Investors are cautiously assessing the slowdown in new subscriber additions — clear signs of decelerating business growth raise questions, especially ahead of the second half of 2026.
Shares approach a 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, quotes plunged 8.98% to $67.78. Since the start of the year, the stock price has fallen more than 21%, and over twelve months — by 41%. The shares are now trading significantly below the historical high of around $133, set in June 2025.
The current downturn coincides with a period of general turbulence in the stock market, caused by mixed earnings reports from the banking sector and recent statements by the Fed Chair regarding the future trajectory of interest rates. Against this backdrop, the tech indices Nasdaq and S&P 500 have shown increased volatility.
Analysts cite slowing growth
The market perceives the current situation as a "natural maturation of the business." This does not mean a deterioration in 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 publish 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%.
My view as an analyst: The market clearly overestimated Netflix's ability to sustain double-digit subscriber growth. The company is entering a maturity phase where key drivers become monetization of the existing base and advertising. Investors should prepare for a new valuation paradigm — with a focus on cash flows rather than the number of new users. The third-quarter results, to be published on October 20, will be a decisive test for this strategy.