Netflix Isn’t Supposed to Miss Earnings Estimates. Here’s What Happened—and Why the Stock Is Dropping.

Core Viewpoint - Netflix's stock is declining after reporting third-quarter earnings that fell below Wall Street estimates, raising concerns about its growth trajectory [2][6]. Financial Performance - Netflix reported third-quarter adjusted earnings of $5.87 per share on revenue of $11.51 billion, missing analyst expectations of $6.96 per share while revenue matched estimates [3][6]. - The company’s revenue increased from $9.83 billion in the same period last year, reflecting a year-over-year growth [3]. - Netflix expects fourth-quarter revenue to grow by 17% compared to the previous year, slightly above Wall Street's estimate of 16% growth [4]. Membership and Viewership - Netflix no longer discloses subscriber numbers but noted achieving its highest quarterly view share in the U.S. and U.K., with growth of 15% and 22% respectively since Q4 2022 [5][6]. - The company has implemented measures such as cracking down on password sharing and introducing lower-priced ad tiers to boost growth [7]. Strategic Initiatives - To maintain and accelerate growth, Netflix is focusing on new content offerings, including live events, family games, and original programming [8]. - Upcoming content includes high-profile releases like "Frankenstein," live Christmas NFL games, and the final season of "Stranger Things," aimed at retaining and acquiring customers [9]. Competitive Landscape - Competition remains a significant concern, with other streaming services like Paramount+, HBO Max, Disney+, and Peacock vying for market share, while YouTube leads in total TV streaming time [10]. - Netflix's stock has seen a decline of about 10% from its record high of $1,339.13 on June 30, despite a 40% increase this year and a 61% rise over the past 12 months [11].