Netflix stock drops 7% in five days after mixed earnings report

Netflix stock dropped 7% in the past five trading sessions following a mixed third quarter earnings report on October 20. The S&P 500 remained relatively flat during the same period.

Netflix reported earnings of $0.87 per share, beating Wall Street estimates of $0.82, while revenue of $12.87 billion met analyst expectations. However, the company forecast fourth quarter revenue of $13.44 billion, below expectations of $13.57 billion, and cut its full-year advertising revenue outlook to $2.7 billion from $3 billion.

Netflix co-CEO Ted Sarandos told analysts the US market is working but not growing as fast as the company would like. He said Netflix had solid doubles and triples this year but other territories count on titles being home runs that travel around the world.

The streaming service has 325 million paid subscribers as of the end of 2025 and maintains the lowest churn rate in the industry at 2%. Third quarter revenue increased 12% year over year, operating margin expanded from 28.2% to 34.6%, and free cash flow reached $2.9 billion. Sarandos announced layoffs affecting 6% of the workforce in response to the stock decline.