Netflix Earnings Preview: Not the Time to Chill

Netflix doesn’t need its third-quarter earnings report on Tuesday to get anyone’s attention. It already has had all sorts of eyes and ears in Hollywood and on Wall Street on it for days. After all, the global streamer has been in the headlines with its largest layoffs in years, hitting around 6 percent of its workforce, and the surprise replacement of chief content officer Bela Bajaria with Peter Rice.

The flurry of changes came after Netflix co-CEO Ted Sarandos had lamented at the Bloomberg Screentime summit on Sept. 30 that “overall, we’re not growing as fast as I want us to, and we’re working on making that move faster.” The message seems to be: This is not a time to chill.

Indeed, the streamer’s engagement momentum has been disappointing Wall Street analysts and management alike, with intense competition for audiences’ attention from the likes of YouTube and TikTok as the background. As a result, Netflix shares have been trading near their 52-week low of $65.08. And some analysts have further reduced their stock price targets on the streamer.

Among Netflix’s third-quarter content slate were the likes of 72 Hours With Kevin Hart, The Whisper Man, The Hawk, the final season of Outer Banks, Monster: The Lizzie Borden Story, The Gentlemen season 2 and Home Run Derby.

Some on Wall Street expect recent price increases to bolster the latest quarterly results, while others wonder if the job cuts and executive changes are an admission of increased concerns about a lack of content momentum and a further weakening of engagement.

Expect Netflix’s Tuesday results and earnings call to attract much attention from analysts and investors looking to dissect commentary on anything from content strategy changes to rev up the content engine again and engagement trends to how advertising and other new revenue initiatives are shaping up.

Here, The Hollywood Reporter has compiled some of the analyst projections and questions for Netflix’s third-quarter earnings report.

Analyst: Brian Pitz, BMO Capital Markets
Stock rating and price target: outperform, $125 from $135
Takeaways: Netflix’s content chief change led Pitz to pare back his financial estimates, also resulting in a lower stock price target. “Peter Rice will replace Bela Bajaria as chief content officer, suggesting to us that engagement trends may have softened further in the third quarter, leading us to reduce our estimates,” the expert explained. “Sensor Tower’s app data and a shift in chief content officer implies muted engagement growth in the third quarter, suggesting near-term results could remain challenged as Netflix cuts 6 percent of its workforce.” He lowered his third-quarter and fourth-quarter revenue estimates by about 1 percent each and also reduced his 2027 revenue forecast by around 1.5 percent, “reflecting softer engagement trends.”

Growth challenges in the core U.S./Canada business remain “the key focal point,” the analyst emphasized. “Investors fear that Netflix’s U.S./Canada segment lacks a near-term catalyst supporting revenue acceleration, especially as view-hours declined in the second quarter.” Calling advertising “the clearest acceleration lever,” he noted that “our model conservatively does not assume a U.S./Canada revenue acceleration until 2029. While we see the ramping advertising business as the clearest driver of eventual growth acceleration, we believe live sports, bundling, and video games offer additional levers that could pull that acceleration forward.”

Pitz is also still bullish on Netflix’s competitive positioning. “Among surveyed U.S. streaming consumers, 75 percent subscribe to Netflix and 37 percent called it their preferred streaming service, more than twice the nearest competitor,” he shared. “Additionally, 76 percent of Netflix subscribers use the service multiple times a week, underscoring the near-daily frequency.” His conclusion: patient Netflix investors should benefit. “While Netflix may struggle to drive meaningful near-term outperformance, investors with duration will be rewarded as Netflix scales into a leading performance ad platform over time.” Or as he summarized in the title of his report: “Still Near-Term Pain, But Attractive Long-Term Gain.”

Analyst: Alicia Reese, Wedbush Securities
Stock rating and price target: outperform, $90, down from $105
Takeaways: “A New Path is Being Laid; It May Take Time,” the analyst summarized in the headline of her preview note, urging investor patience. So why the price target drop? “Our price target still bets on the advertising ramp, layered with games, podcasts, and eventually performance marketing,” she explained. “However, it may take longer with the significant changes underway.”

The optimism in her take: “Engagement remains central to the bear case; however, ad revenue matters more. Ad revenue remains on track to double to roughly $3 billion in 2026, and Netflix is actively making changes that should address both its engagement issues and shift dollars from heavy infrastructure to more focused content spend.”

Reese’s estimates assume 5 percent year-over-year growth in total global subscribers, “with net paid additions of 2.2 million, a 500,000 drop in the U.S./Canada and modest increases elsewhere.” She also projects an increase, compared to the second quarter, in average revenue per member, driven by “higher prices and subscription retention, plus growing ad spend driven by better targeting and stable CPMs.”

Analyst: Michael Morris, Guggenheim
Stock rating and price target: buy, $80, up from $75
Takeaways: Yes, there are challenges, Morris also acknowledged, citing “continued investor concern, particularly focused on revenue trajectory and content slate.” But he pointed out that Netflix’s stock has been trading at 22 times his 2026 earnings estimate, “in line with the broader market, and a 25 percent discount to Alphabet and Meta on 2027.” As a result, “we see an attractive price for sustainable core growth and potential return on incremental initiatives.”

In the third-quarter update, he sees one key investor focus on “core revenue pacing and average revenue per member outlook in the face of challenging content comparisons and no scheduled engagement or membership update.” A potential positive would be any “evidence that platform expansion (podcasts, short-form, games, distribution partnerships) is showing incrementality,” he added.

Morris is also curious about management’s “outlook for content investment allocation or [a] trajectory change given that management does not plan to ‘take a pause on margin expansion to spend more on content.'”

Analyst: Sean Diffley, Morgan Stanley
Stock rating and price target: overweight, $80, down from $83
Takeaways: “As the number of things vying for our attention is increasing at an accelerating rate, it becomes harder to drive meaningful hours of engagement and time spent across different forms of media & entertainment,” the analyst emphasized in his report entitled “Ice Age: Dawn of the Dinosaurs?” “While once the disrupter, challenger and share taker, Netflix now finds itself on the other side of the chasm and seemingly has to fight harder to remain relevant.”

Explained Diffley: “Stagnant viewing hours and lack of a big English-language hit have been the primary drivers of weakness. A stronger slate and more sports should drive urgency.” And he pointed to “recent green shoots,” such as East of Eden, a Disney licensing deal, Indian content and Netflix’s TF1 deal in France.

The expert also addressed the engagement debate that “has lingered nearly all year, [but] has reached a fever pitch in the last few months, particularly as YouTube continues to take share of total viewing time.” While calling this “a real debate,” he suggested that Netflix was not facing “a broken model,” as the goal should be “weighing quality and variety enough.” His conclusion: “Netflix remains one of the largest premium entertainment platforms globally, with engagement spread across an increasingly broad mix of scripted series, films, licensed content, live events, video podcasts and games. We believe the next leg of the story is less about maximizing hours at any cost and more about increasing the frequency of reasons to open Netflix, improving discovery, and monetizing each hour more effectively through advertising.” In other words: YouTube may win the showdown in terms of total viewing hours, but Netflix could “remain highly advantaged in premium, intentional entertainment engagement.”

Analyst: Mark Mahaney, Evercore ISI
Stock rating and price target: outperform, $110, recently up from $100
Takeaways: The analyst expects a financially in-line third quarter, but mentioned one key risk looking ahead. “In July, the third-quarter guide came in below the Street on every line,” he explained. “A repeat on the fourth quarter is the main risk to the stock reaction. Fourth-quarter catalysts include the [recently unveiled] U.K. price increase, NFL Thanksgiving Eve and Christmas games, and the WWE launch in Japan.”

Could revenue actually surprise on the upside? “We view the Street’s revenue estimate of $12.9 billion as reasonable to modestly conservative at +12 percent year-over-year and +3 percent quarter-over-quarter,” Mahaney wrote. “Netflix has landed within about 1 percent of its revenue guide in each of the last eight quarters. Recall, the third quarter is the first full quarter of the first-half price changes; in the U.S./Canada, second-quarter growth of 10 percent reflected only a partial-quarter benefit.”

On the earnings call, the expert will be listening out for all sorts of color. Among key topics, he mentioned: “Is engagement softness becoming a revenue problem? Netflix moving its What We Watched report to annual cadence makes retention and pricing commentary the main proof point.”

Analyst: John Blackledge, TD Cowen
Stock rating and price target: buy, $100
Takeaways: The analyst predicted 10 percent-plus revenue growth and rising profit margins “over the next few years, consistent with Netflix’s financial objectives.” After all, “while the investor narrative has remained focused on recent soft engagement trends, Netflix is seeding emerging engagement vectors (live, podcasts, etc.) that could lift engagement and drive member growth and retention,” Blackledge explained.

But what about the near-term challenges? “We acknowledge that Netflix engagement growth has been soft, in our view likely a product of broader expansion of social media and short-form video,” the analyst wrote. “However, we’re bullish on Netflix’s push into podcasts and promotion of their Clips vertical video feature, as we believe these efforts can incrementally drive penetration and engagement among mobile viewers throughout the day.”

He also touted the results of a recent survey. “We asked our surveyed consumers which platform they use most often to view video content on their TV, and Netflix held the top spot in the third quarter through August with 23 percent of respondents, followed by YouTube (19 percent) and Amazon Prime Video (9 percent),” Blackledge noted. “We think Netflix’s broad catalog across multiple genres creates a durable advantage over time.”