4 minBusiness
Netflix Shares Fall to Two-Year Low After Ad Revenue Forecast Cut
Netflix shares dropped more than 6% in premarket trading after the streaming giant cut its full-year 2026 ad revenue forecast by $300 million, citing delays in rolling out new advertising products and partner integrations.
Netflix shares tumbled to their lowest level in more than two years after the streaming giant trimmed its advertising revenue forecast for the full year, overshadowing otherwise solid third-quarter results.
The company now expects ad revenue of about $2.7 billion for fiscal 2026, roughly $300 million — or 10% — below its previous projection of $3 billion. The reduced outlook sent the stock down more than 6.4% to $64.23 in premarket trading, after it closed at $68.69. That price is the lowest since August 2024.
The revision landed even though Netflix met Wall Street's revenue target for the quarter. Revenue totaled $12.87 billion, up 11.8% from a year earlier, and diluted earnings per share came in at 87 cents, five cents above analyst expectations. But investors focused on the advertising shortfall and a softer-than-expected outlook for the current quarter.
Netflix projected fourth-quarter revenue growth of about 11.5% to $13.44 billion, below the $13.51 billion analysts had anticipated. For the full fiscal year, the company said it expects revenue of $51.1 billion, an increase of about 13% year over year but at the low end of its earlier guidance range.
Co-CEO Greg Peters attributed the advertising downgrade to slower-than-planned launches of some new ad products and delays in partner integrations. «We've seen some delays in the rollout and partner integrations for some of those new ads products,» Peters said on the company's earnings call. «So getting to the integration model that we want sometimes takes a bit more work with our partners, but we strongly believe that a modest short-term hit for a better long-term strategic position is a good ultimate tradeoff.»
Peters said the slower rollout should not affect long-term gains, but investors tend to evaluate performance quarter by quarter, and the lower forecast weighed heavily on the share price.
The ad-supported tier has become central to Netflix's growth strategy. The company has raised prices on ad-free subscriptions for years, betting that cost-conscious viewers will downgrade to the cheaper, advertising-supported option rather than cancel. While that shift brings in less subscription revenue up front, Netflix expects to earn more per subscriber over time by serving ads. Most major streaming services have adopted similar tiers, and investors have placed significant hopes for revenue growth on advertising.
The stock had already been under pressure before the latest drop. Even before the premarket decline, Netflix shares were down more than 26% for the year, and they had fallen 44.5% over the past 12 months as of the previous close.
Peters expressed confidence in the advertising business, telling analysts that advertisers want the company's new products and features. «Ultimately, advertisers want our new products and features, and that's a big mechanism of growth for us,» he said. «So we are very focused on getting those out to them as quickly as we possibly can.»
Whether that confidence is enough to reassure investors will become clearer in the coming quarters, as the company works to complete the partner integrations and product rollouts that it says are key to expanding its advertising revenue.
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