Netflix itself has already tapped the brakes on advertising as a growth driver.
Q3 revenue was $12.87 billion, up 11.8% year over year and in line with the company’s guidance. Diluted EPS was $0.87. The operating margin rose to 34.6%, from 28.2% a year earlier. Free cash flow was $2.88 billion—not a bad showing on the books.
What really made the market frown was the outlook: the full-year advertising revenue forecast was cut from about $3 billion to about $2.7 billion, citing slower-than-expected rollout of some ad product capabilities. Q4 revenue is forecast at $13.44 billion (+11.5% year over year), with an operating margin of 26.0% (including an estimated 120 basis points of impact from layoffs). Full-year revenue is still projected at $51.1 billion, with a 31.5% margin, but that’s slightly below the midpoint of the previous range, by 0.2%.
Reuters and others reported that $NFLX shares fell roughly 5% the day after its earnings report. I’ve just finished screening Meta, Tesla, and Lam Research, and the streaming giant’s “slowdown” is worth noting too—softer guidance doesn’t mean the company is falling apart; it just means the growth story is shifting gears.
Screening only, not educating. This is not investment advice.