Brad Freeman
Equity Researcher, Creator of Stock Market Nerd
Netflix's revenue growth keeps slowing, with little sign yet that the trend will reverse. Third-quarter growth fell to 11.8% from 13.4% in the prior quarter; profit beat mainly on expense timing, while slower product rollouts held back revenue guidance. Competition remains the main concern: Apple, Amazon and Alphabet can spend heavily on streaming without relying on their libraries for profit. Nothing in the report was alarmingly bad, but there is little to get excited about. x.comÂ
Netflix is in a tough spot because Apple, Amazon and Alphabet have prioritized streaming libraries they don't need to profit from, and they have far more money to spend. Slower growth will be blamed on live programming, but live content brings engaged new members that should offset lower watch hours per dollar. Like an apparel company, Netflix depends on its content staying in style, with little room for failures and virtually no switching costs. These pressures look structural and long-lasting. x.com x.com x.comÂ
Netflix's slowing growth and weaker outlook make it unattractive for now. Revenue growth decelerated to 11.8%, U.S. TV viewing share fell 0.8 percentage points, advertising guidance was reduced 10%, and full-year free-cash-flow guidance was cut $500M, despite expanding operating margins and better subscriber retention. x.com x.comÂ
Netflix's earnings growth cannot keep relying on price increases or a one-time ad-tier rollout when future ad growth depends on impressions. The password-sharing crackdown, ad tier and repeated price hikes amid declining time spent signal a mature business; podcasts and live sports look like attempts to find another growth leg. There is no reason to own the stock beyond its discount to historical valuation, which it should command. x.com x.comÂ
Netflix's improving engagement and record free-cash-flow yield make its continued stock decline look misplaced. Viewing hours rose 24% year over year; CEO Greg Peters said Q3 churn improved globally and in the US, beating forecasts. CFO Spence Neumann expects sustained double-digit revenue growth. x.com x.comÂ
Netflix faces high costs to keep producing major hits, while live TV is expensive and competitive and viewing habits are changing rapidly. It remains a good business and the stock should eventually find support, but even after its decline it is not appealing at this level. x.comÂ
Netflix's stock and content quality look poor, pointing to a slow grind lower. x.comÂ
Netflix's below-market multiple and expected revenue growth should limit downside despite another quarterly guidance miss. At 19.2x FY2026 EPS, it trades below the S&P 500 multiple with 10% long-term revenue growth. Third-quarter results broadly met expectations, but fourth-quarter revenue, operating income, EPS and margin guidance missed Wall Street estimates; last week's 6% workforce cut had telegraphed weakness. x.comÂ
Netflix's below-estimate revenue outlook, operating income and EPS leave the stock looking like dead money from here. It sees $13.44B in fourth-quarter revenue versus $13.51B expected; operating income was $3.50B versus $3.72B expected, and EPS was $0.67 versus $0.73. x.comÂ
If Netflix's engagement keeps declining, it will be able to charge less over the long term even if reduced use has not stopped subscriptions yet. Netflix's discoverability is terrible; it keeps showing the same options. x.com x.comÂ
Netflix's slowing growth and reduced ad forecast temper the case for ads as a growth engine. Growth eased from 17% a year ago to 12%, with 11.5% expected next quarter; this year's ad revenue forecast fell from about $3 billion to $2.7 billion. Free cash flow guidance fell from $12.5 billion to $12 billion. A more appealing P/E could make adding shares worth considering. x.com x.comÂ
Netflix's six straight botched earnings reports undermine its stock. Its co-CEOs should go; shares are at a two-year low and down 60% since its involvement in the Paramount deal and acquisition. x.com x.com x.comÂ
