Key Points
Netflix reports third-quarter results Tuesday after the close. It guided to revenue of $12.86 billion, up 11.7%, and earnings of $0.82 a share.
Netflix stock fell 2.8% Friday to $70.55. It's now down about 35% from its 2026 high of $108.95.
Netflix named former Disney TV chief Peter Rice as chief content officer on Thursday, replacing 10-year veteran Bela Bajaria. CNBC says viewership has stagnated in recent quarters.
Management wants advertising revenue to roughly double to about $3 billion this year. Investors want proof it's on track.
It's the busiest week of earnings season so far: SpaceX on Tuesday, then Tesla, Meta, IBM and Lam Research on Wednesday.
Netflix used to be the stock that only went up. This year, it's been the opposite.
The stock fell 2.8% on Friday to $70.55, a day after Netflix shook up its leadership. That leaves it about 35% below its 2026 high of $108.95.
On Tuesday afternoon, the company has to show investors it still has a growth story. And it made a big move just days before the report.
A New Boss for the Shows
On Thursday, Netflix announced that Peter Rice will become chief content officer on October 26. Rice ran Walt Disney Television and Disney's general entertainment business, where he oversaw ABC, FX, Hulu and National Geographic and more than 300 shows a year, including "The Bear," "Abbott Elementary" and "Shogun."
He replaces Bela Bajaria, who spent nearly 10 years at Netflix and ran its roughly $20 billion content budget.
The timing tells you something. CNBC reported that Netflix's viewership has stagnated in recent quarters. Bringing in a Hollywood veteran four days before earnings is a signal that management knows the content engine needs a jolt.
The Bar Is Already Low
In July, Netflix guided third-quarter revenue to $12.86 billion and earnings to $0.82 a share. Wall Street had expected $13 billion and $0.84. The stock fell nearly 8% after hours.
That guidance implies 11.7% growth, the slowest pace since 2023. For the full year, Netflix expects revenue of $51.0 billion to $51.4 billion and an operating margin of 31.5%.
There's a catch in the comparison. A year ago, Netflix took a one-time Brazilian tax charge of roughly $619 million, according to Pip Theory. That makes this quarter's earnings growth look much stronger than the underlying business really is.
Ads Are the Whole Ballgame
With subscriber growth slowing, advertising has to carry the next leg.
Management has said ad revenue should roughly double to about $3 billion this year. In the second quarter, it brought in about $618 million from ads, short of what analysts wanted.
Investors will also be watching the fourth-quarter outlook. Netflix's full-year range implies fourth-quarter revenue of roughly $13.33 billion to $13.73 billion. Anything at the low end will raise the question of whether higher prices are starting to bite. Streaming services were one of the categories that got more expensive in the latest inflation report.
The Rest of a Very Loud Week
Netflix is just the start.
Monday: China reports third-quarter GDP, expected to grow 4.4%. Cleveland-Cliffs and Fifth Third report.
Tuesday: GE Aerospace, GM, RTX, Northrop Grumman and 3M report before the bell, followed by September housing starts. After the close, Netflix, SpaceX, Intuitive Surgical, United Airlines and Capital One all report.
Wednesday: Abbott, NextEra and AT&T report in the morning. After the close come Tesla, Meta, IBM, Lam Research and Texas Instruments. Meta has guided to revenue of $61 billion to $64 billion and capital spending of up to $145 billion this year.
Thursday: Lockheed Martin, Comcast, American Airlines, Blackstone and Dow report, along with weekly jobless claims.
Friday: American Express and SLB close out the week.
All of this lands on a nervous market. The Nasdaq lost 4.5% last week, and the S&P 500 fell 1.9%. The PHLX Semiconductor Index fell 3.8% on Friday alone, its eighth straight decline. The VIX jumped to about 20, and the 10-year Treasury yield ended the week near 5.08%.
The Fed is now in its quiet period ahead of the October 27-28 meeting. And the midterm elections are just over two weeks away. Dylan walked through what history says happens to stocks after a midterm.
What It All Means
For the past two years, a handful of AI names carried the market. Last week, investors started asking who's paying for all of it. This week, the companies doing the spending have to answer.
Netflix isn't an AI story. But it faces the same question as everyone else on this calendar: can it still grow fast enough to justify what investors pay for it?
We'll find out Tuesday at about 4:01 p.m.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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