Netflix third-quarter earnings forecast falls shy of Wall Street expectations

Netflix is facing competition from all corners of the entertainment industry, from traditional media companies such as Walt Disney to YouTube, a growing presence in living rooms, and mobile viewing on apps such as TikTok.

Prior to the earnings report, the streaming giant had shed over a fifth of its value as investors worried about how the company would boost revenue and gain new customers. In April, Netflix said it had more than 325 million paying members and still had room to increase that number.

The company is building an advertising business and offering video games, two initiatives still in the early stages. It repeated an earlier forecast that ad revenue would reach $3 billion by the end of the year. The company is counting on its growing number of live events, including an expanded NFL slate, to draw more advertising dollars.

Netflix said engagement, or the amount of time people spend watching the service, was "healthy." Viewing hours grew by 2% in the first half of the year, compared with 1.5% a year ago.

Netflix forecast third-quarter revenue of $12.86 billion and diluted earnings per share of 82 cents.

Analysts had forecast $13 billion in revenue and diluted EPS of 84 cents, according to LSEG.

The company said it would reduce the amount of information it discloses on viewing hours as the streaming video pioneer seeks new avenues of growth.