Netflix shares drop on slowing engagement, revenue growth

SAN FRANCISCO: Netflix shares fell more than five per cent on Tuesday afternoon after its quarterly earnings report failed to ease investor concerns about slowing viewer engagement and revenue growth.

"We know there's some investor concern about our view hours growth," the company said in a letter to investors, referring to how it measures engagement, adding that it was "confident" it could accelerate that growth.

The California-based streaming giant has struggled to meet investor expectations for several quarters as it faces competition from other streaming services, gaming and sports.

Netflix "has underperformed significantly over the last 6-12 months", and investors are concerned "about soft engagement trends, decelerating revenue growth, a slower margin expansion outlook, and most recently content executive leadership changes", John Belton, a portfolio manager at Gabelli Funds, told AFP in a statement.

In its third quarter, which ended in September, Netflix recorded US$12.87 billion in revenue and US$3.7 billion in net income, above investor expectations, according to FactSet.

It did not provide overall figures for subscriber viewing hours during the quarter, but noted that the metric increased 24 per cent in India compared with the same period last year.

In July, Netflix said subscribers had spent 97 billion hours watching content in the first half of the year, a two per cent increase from the first half of 2025.

It stopped reporting subscriber numbers in the first half of 2025.

However, the company touted growth outside the US while acknowledging challenges in its home market.

"We do need better execution in the US. Our content around the world is largely working," co-chief executive Ted Sarandos told investors on an analyst call on Tuesday, highlighting engagement, subscribers, revenue and profits across Latin America, Europe and Asia.

"The US is also working. It's just not growing as fast as it could or as fast as we'd like," Sarandos added.

Job cuts

The company will also reportedly cut around six per cent of its workforce, or 1,000 jobs, according to media reports.

Among those affected were seven senior employees responsible for television deals and content, The Hollywood Reporter reported last week.

The company also recently replaced chief content officer Bela Bajaria, who oversaw popular shows including "Stranger Things", "Bridgerton" and "Squid Game", while also driving the company's live entertainment strategy, according to CNBC.

Netflix appointed former Disney executive Peter Rice as its new content chief.

"Peter Rice understands talent relations, and in a competitive market, creative talent have choices of where they want to work," Sarandos said on Tuesday's call.

Diverse formats

Competition from other streaming services has forced Netflix to work harder to attract and retain both paying and ad-supported subscribers.

The company has increasingly ventured into live sports, with agreements to stream major events such as the Olympics and World Cup, alongside gaming and shorter-form content. The NFL and WWE have also signed on to stream live events.

In the US, Netflix accounted for 7.8 per cent of streaming television viewership in July, compared with YouTube's 14.2 per cent, a record for the Google-owned platform, according to media analytics firm Nielsen.

The World Cup boosted overall television viewership in July, according to Nielsen.

"It's really important to remember, roughly 95 per cent of our spend and nearly all of our revenue is focused on that core, where we see a long runway for future growth," Sarandos said on Tuesday's call, emphasising the company's commitment to traditional television and film content.

The company also fell short of expectations for advertising revenue growth.

"We are currently a bit behind our aggressive target for the year. We're still growing" in advertising, co-chief executive Greg Peters said on the call.

"We see the benefits when we continue to roll out other products like new ad formats, which help with our growth," Peters added.