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Netflix has cut its full-year advertising forecast and issued weaker-than-expected fourth-quarter profit guidance as the streaming company attempts to accelerate growth following a major shake-up of its workforce and content leadership.
The company now expects advertising revenue of approximately $2.7 billion in 2026, down from its previous forecast of around $3 billion.
Netflix said some advertising product capabilities had been introduced more slowly than expected, although subscription revenue growth has performed better than anticipated.
The revised outlook comes despite a profitable third quarter.
Revenue increased 11.8% to $12.87 billion, broadly in line with Wall Street expectations but representing Netflix’s slowest rate of revenue growth in nearly three years.
Operating income reached $4.5 billion, up 37% from a year earlier, while operating margin increased to 34.6% from 28.2%.
Diluted earnings per share rose 49% to 87 cents, ahead of the 82 cents expected by analysts surveyed by LSEG.
The company’s fourth-quarter outlook was less encouraging.
Netflix expects net income of $2.79 billion and earnings per share of 67 cents, compared with analysts’ average forecasts of $3.07 billion and 73 cents respectively.
Fourth-quarter revenue is forecast at approximately $13.4 billion, representing year-on-year growth of around 12%.
The results arrive during a significant organisational reset at Netflix.
The company cut approximately 1,000 jobs last week, equivalent to around 6% of its workforce and its largest round of layoffs since 2022.
Netflix also replaced Chief Creative Officer Bela Bajaria, while film chief Dan Lin is leaving the company.
Former Disney and Fox executive Peter Rice has been appointed to replace Bajaria and will temporarily oversee the film division until a successor to Lin is selected.
Co-CEO Ted Sarandos acknowledged that Netflix needs to improve its performance but rejected the need for a fundamental change in strategy.
Instead, management is putting renewed emphasis on its core streaming business and better execution in the United States.
Netflix plans to continue investing in original television and films while expanding its selection of licensed third-party programming.
Streaming television, film and live events account for the vast majority of the company’s spending and nearly all of its revenue.
The company is attempting to strengthen that core business as competition for viewers intensifies.
YouTube has become a particularly significant competitor. US viewers now spend nearly twice as much time watching YouTube as Netflix, according to Nielsen data cited by Reuters.
Advertising has also become an increasingly important component of Netflix’s growth strategy, making the reduction in its 2026 forecast significant despite the company’s continuing profitability.
Netflix expects a full-year operating margin of 31.5%, up from 29.5% in 2025, with annual operating income expected to grow by more than 20%.
The recent job cuts will weigh on the fourth quarter, however, reducing its expected operating margin by approximately 1.2 percentage points.
For Sarandos and co-CEO Greg Peters, the challenge is therefore not repairing an unprofitable business but restoring stronger growth while protecting margins.
Netflix’s leadership changes and workforce reductions indicate management is prepared to change how the company operates while retaining its broader strategy.
The immediate test will be whether the renewed emphasis on programming can strengthen engagement while the advertising business develops more quickly.
Investors have reacted cautiously. Netflix shares fell around 6% following the results and weaker outlook.
With revenue growth at its slowest rate in nearly three years and the advertising forecast reduced, Netflix now needs to demonstrate that its organisational reset can produce faster growth without undermining the profitability it has already achieved.