Netflix shares drop over 5% on engagement worries

Netflix shares fell more than 5% on Tuesday afternoon after its quarterly earnings release failed to ease investor concern about slowing viewer engagement and revenue growth.

In a letter to investors, Netflix said it knew there was concern about view-hours growth, its measure of engagement, and said it was confident it could accelerate that growth.

The company reported $12.87 billion in revenue and $3.7 billion in net income for its third quarter, which ended in September. FactSet said both figures were above investor expectations. Netflix did not provide an overall figure for subscriber view hours in the quarter, but said view hours in India rose 24% from the same period last year.

In July, Netflix said subscribers watched 97 billion hours of content in the first half of the year, up 2% from the first half of 2025. It stopped reporting subscriber numbers in the first half of 2025.

John Belton, a portfolio manager at Gabelli Funds, told AFP that investors were concerned about soft engagement trends, slowing revenue growth, a slower margin expansion outlook and content executive leadership changes.

Netflix co-CEO Ted Sarandos told investors on Tuesday that the company needed better execution in the United States. He said content around the world was largely working, while the US was “not growing as fast as it could or as fast as we'd like.”

Media reports said Netflix would cut about 6% of its workforce, or around 1,000 jobs. The Hollywood Reporter reported last week that the cuts included seven senior employees in charge of television deals and content.

Netflix also recently replaced chief content officer Bela Bajaria, according to CNBC, and appointed former Disney executive Peter Rice as its new content chief. Sarandos said Rice understood talent relations in a competitive market.

Netflix has moved further into live sports, gaming and shorter-form content while continuing to focus most spending and revenue on traditional television and film. Nielsen said Netflix reached 7.8% of US streaming television viewers in July, compared with 14.2% for YouTube.

Co-CEO Greg Peters told investors that Netflix was behind its advertising revenue growth target for the year but was still growing in advertising. He said new ad formats could help that growth.