Netflix issues weak fourth-quarter forecast as company seeks to kick-start growth

By Lisa Richwine

LOS ANGELES, Oct 20 (Reuters) - Netflix issued a weaker-than-expected forecast for fourth-quarter profit on Tuesday, days after the streaming pioneer laid off 6% of its workforce and replaced two of its top programming executives.

Third-quarter revenue rose 11.8% to $13.44 billion, in line with Wall Street forecasts, but the lowest rate of increase in nearly three years. The company forecast fourth-quarter net income of $2.79 billion and EPS of 67 cents, below the average analyst forecast of $3.07 billion and 73 cents.

Netflix reduced its advertising forecast for 2026 to roughly $2.7 billion, down from about $3 billion. Some ad product capabilities rolled out slightly slower than expected, executives said in their quarterly letter to shareholders.

The company that shook up Hollywood when it started streaming TV shows and movies two decades ago is now competing with a surge in viewership on YouTube and TikTok. Netflix has invested in video games, podcasts and live events to draw new viewers and increase the time members spend on the platform. 

Wall Street analysts have questioned how the company will kick-start growth. Netflix shares had fallen more than 40% in a year before the earnings report. 

Looking ahead, Netflix said it would continue to expand its offerings through licensing more third-party content. Beyond that, it will focus on the core service of streaming TV, film and live events and invest in original shows that "spark conversation, bring in more members and make us a 'must-have' service," executives said in the letter.

For the third quarter, earnings per share came in at 87 cents, ahead of the 82 cents average forecast of analysts surveyed by LSEG. New programming during the quarter included "Monster: The Lizzie Borden Story," the second season of "The Gentlemen," the final installment of "Outer Banks" and a reboot of "Little House on the Prairie."

Last week, Netflix laid off 1,000 people, or about 6% of its employees. The company replaced Chief Creative Officer Bela Bajaria and said film chief Dan Lin was departing, signs that it is resetting its programming strategy. 

Earlier this year, Netflix lost a bidding war for Warner Bros Discovery and its rich library of characters, which was sold to David Ellison-led Skydance.

(Reporting by Lisa Richwine; Editing by Aurora Ellis)