Netflix stock falls as analysts question growth despite earnings beat

Netflix stock falls as analysts question growth despite earnings beat

Netflix shares NFLX fell in trading on Wednesday after its third-quarter earnings exceeded expectations, but a weaker revenue forecast and concerns about slowing engagement raised questions about its growth prospects.

The streaming company reported adjusted earnings of 87 cents per share on revenue of $12.9 billion for the fiscal third quarter, compared with analysts’ expectations of 82 cents per share on the same revenue, according to FactSet.

However, Netflix forecast fourth-quarter revenue of $13.4 billion, slightly below Wall Street’s estimate of $13.5 billion.

The stock dropped 4.48% on Wednesday after the results.

Netflix shares have declined 27% in 2026, reflecting investor concerns about slowing growth, competition and the company’s content strategy.

Engagement concerns weigh on Netflix shares

Investors are increasingly focused on whether Netflix can sustain viewer engagement as competition intensifies across the streaming industry.

Disney+, Amazon Prime Video and Alphabet’s YouTube compete for viewers’ attention, while the merger of Paramount Skydance and Warner Bros.

Discovery has brought Paramount+ and HBO Max under one corporate umbrella.

Netflix also announced in July that it would publish its engagement report annually rather than twice a year, instead of twice annually, adding to investor scrutiny of its viewing trends.

In its shareholder letter on Tuesday, Netflix acknowledged concerns about growth in viewing hours.

The company said member responses to its 2026 price increases were consistent with previous changes and expectations, which it viewed as evidence that engagement remained healthy.

Netflix also said it wanted to accelerate growth in viewing hours.

Its strategy includes investing in original content exclusive to the platform, alongside live events intended to attract subscribers.

However, live events can generate short-term viewership without necessarily encouraging the sustained viewing associated with television series.

The company’s outlook has prompted differing assessments from analysts, particularly as attention shifts towards its growth and profitability in 2027.

Analysts split over Netflix’s growth prospects

Morningstar described the share-price decline as the best buying opportunity for Netflix shares in years, maintaining a narrow economic moat assessment and an $80 price target.

That target implied more than 16% upside from the stock’s last closing price.

The research firm identified the planned expansion of Netflix’s advertising-supported tier as a potential growth driver.

The company intends to introduce the tier in 15 additional international markets in 2027, including nine EMEA countries, Colombia, Peru and New Zealand.

Morningstar also highlighted lower-than-expected customer churn and the potential for further US price increases and advertising growth.

Needham, however, downgraded Netflix to Hold from Buy, citing decelerating foreign-exchange-neutral revenue growth.

Growth slowed from 14% in the first quarter to 12% in the second and 11% in the third.

The firm expects revenue growth to fall into single digits in fiscal 2027 and raised concerns about the company’s content slate and competitive position relative to YouTube.

Other firms also reduced their price targets.

Bernstein lowered its target to $80 from $95 while maintaining an Outperform rating.

Rosenblatt cut its target to $71 from $75 and retained Neutral, while Barclays reduced its target to $65 from $70 and maintained Equal Weight.

Subscription business remains a source of support

Despite concerns about growth, several analysts continued to see strengths in Netflix’s core business.

JPMorgan maintained an Overweight rating, saying the subscription business remained healthy despite pressure on the shares from lower revenue expectations and uncertainty about 2027 growth and margins.

Bank of America said Netflix’s valuation remained undemanding for a global platform with more than 300 million subscribers, double-digit revenue growth, expanding margins and rising capital returns.

Goldman Sachs also maintained that the longer-term double-digit growth outlook remained intact, although it identified US content engagement as a key factor for the stock.

Morgan Stanley pointed to continued double-digit revenue growth and viewed the workforce reductions and content leadership change as signs of decisive action.

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