Netflix faces questions on user engagement ahead of third-quarter report
NFLX•Investors are looking for details on how Netflix plans to sustain growth as it reports third-quarter results on Tuesday. Revenue is forecast to rise 11.8% to $12.87 billion, while US churn rose 16.6% year over year and US and Canada downloads fell 20%.
1. Growth and engagement
Netflix is expected to post its slowest third-quarter revenue growth in three years, with sales forecast to increase 11.8% to $12.87 billion. Co-CEO Ted Sarandos said Netflix “is not growing as fast as I want us to” and suggested live programming could be an opportunity to accelerate growth.
2. Signs of fatigue
US user churn rose 16.6% year over year in the third quarter, roughly double the pace of the prior three quarters, while downloads in the US and Canada fell 20%, market research firm Apptopia said. Jefferies estimates average monthly viewing time per Netflix member fell to 49 hours in the first half of this year from 66 hours in the first half of 2023. Analysts said the 2026 FIFA World Cup and a weaker content slate than last year weighed on engagement.
3. Strategic changes
Netflix cut about 6% of its workforce, a move analyst Ross Benes of Emarketer said reflected the streaming industry's shift to profitability. Longtime head of content Bela Bajaria left the company and former Disney executive Peter Rice took over. Netflix acquired broadcast rights to air the 2030 FIFA World Cup in Spain and Andorra and is betting on advertising to diversify revenue; Jefferies forecasts ad revenue will reach $7.5 billion in 2029.
