Netflix Shares Plunge 6% After $300 Million Ad Forecast Cut, Just Days After CEOs Called Business «Strong and Growing»

Netflix shares plunged approximately 6% in after-hours trading on October 20 after the streaming giant lowered its annual advertising revenue forecast by $300 million. The selloff came just six days after co-CEOs Ted Sarandos and Greg Peters reassured employees that business remained healthy while announcing approximately 1,000 layoffs, representing 6% of the company’s workforce.

In an internal memorandum distributed on October 14, Sarandos and Peters told employees, «Our business is strong and growing, and we remain on track to deliver our full-year forecast.» The optimistic statement accompanied one of Netflix’s largest workforce reductions in recent years, creating a striking contrast with the disappointing financial outlook released less than a week later.

The restructuring affected approximately 1,000 positions across departments including technology, product development, legal operations and human resources. Netflix characterized the reductions as a strategic effort to concentrate resources on its highest priorities rather than a response to immediate financial difficulties. The company continued investing in programming and technology while eliminating roughly 6% of its employees.

In their October 14 memorandum, Sarandos and Peters explained, «Our mission – to entertain the world – is ambitious, and delivering on it requires us to be disciplined about where we prioritize our people and resources.» The executives also promised continued investment in innovation, presenting the layoffs as necessary adjustments to strengthen Netflix’s future competitive position.

On October 20, Netflix disclosed that its advertising business was expected to generate approximately $2.7 billion in 2026, down from its previous $3 billion projection. The 10% reduction reflected delays introducing certain advertising products and technological capabilities. Although subscription revenue performed better than anticipated, the disappointing advertising outlook raised concerns about future growth.

According to Netflix, the reduced advertising projection resulted primarily from a slower-than-expected rollout of new advertising capabilities, rather than an abrupt collapse in advertiser demand. The company maintained its expectation of approximately $51.1 billion in annual revenue, representing 13% growth. Nevertheless, the revision revealed that advertising expansion was progressing more slowly than investors anticipated.

Despite the advertising setback, Netflix reported third-quarter revenue of approximately $12.87 billion, an increase of 11.8% from the previous year. Net income climbed to roughly $3.66 billion, while operating income reached approximately $4.46 billion. These results demonstrated continued profitability, but investors focused instead on slowing growth and disappointing expectations for the coming quarter.

Netflix projected fourth-quarter earnings of $0.67 per share, below analysts’ expectations of approximately $0.73. Its anticipated quarterly revenue of $13.44 billion also fell short of estimates. Although the company continued generating substantial profits, the weaker outlook suggested that advertising delays and slower revenue growth could complicate its efforts to meet increasingly ambitious investor expectations.

The financial disappointment followed major leadership changes, including the departure of Chief Content Officer Bela Bajaria and the appointment of former Disney executive Peter Rice. Film chief Dan Lin also left the company. During an earnings discussion, Sarandos acknowledged the need to strengthen Netflix’s entertainment offering, stating, «I know that we could do better.»

Netflix faces increasingly intense competition from YouTube, Disney+, Amazon Prime Video and other entertainment platforms competing for viewers and advertising revenue. The company reported approximately 97 billion hours watched during the first half of 2026, representing modest annual growth of 2%. Management is emphasizing stronger original programming, live entertainment and advertising improvements to sustain expansion.

Netflix shares fell approximately 6% to around $64.66 in extended trading, highlighting Wall Street’s reaction to the $300 million advertising forecast reduction. Although the company’s profits continued rising, the selloff placed renewed attention on executives’ recent «strong and growing» assurances. The contrast underscores the pressure Netflix faces to deliver results matching investors’ expectations.