Shares fall 5.9% in after-hours trading

The Netflix logo. [AP]
The Netflix logo. [AP]

Netflix posted stronger-than-expected profit in the third quarter, but shares slid 5.6% in after-hours trading as concerns over stagnant viewership and a struggling advertising business persisted.

In a shareholder letter published Tuesday (local time), Netflix said third-quarter earnings per share came in at 87 cents, topping the Wall Street consensus of 82 cents compiled by LSEG. Revenue of $12.87 billion matched analyst expectations.

Revenue grew nearly 12% from the same period a year earlier, while net profit rose from $2.55 billion to $3.66 billion.

Netflix projected fourth-quarter revenue of $13.44 billion.

The company set its full-year revenue outlook at $51.1 billion, representing 13% growth. That figure sits at the low end of the $51 billion-to-$51.4 billion range it had previously guided and falls short of the Wall Street consensus of $51.2 billion.

Netflix also cut its advertising revenue forecast for this year, lowering it from about $3 billion to about $2.7 billion. The company said the revision reflected delays in rolling out certain ad product features.

In the shareholder letter, Netflix acknowledged investor concerns about the pace of viewership growth but said "engagement — encompassing the quantity, quality and diversity of viewing — remains healthy."

The company laid off about 1,000 employees, roughly 6% of its workforce, last week. It also announced that Chief Content Officer Bela Bajaria would step down, with former Disney executive Peter Rice named as her successor.

Netflix said the layoffs would weigh on fourth-quarter operating margins by approximately 120 basis points.

During the quarter, Netflix bought back 63.9 million shares for $4.8 billion. The company said competition for consumer attention had intensified and stressed that "strategic clarity and excellent execution" would be critical going forward.

Wall Street is closely watching signs of viewership stagnation amid intensifying competition from YouTube and other platforms, CNBC reported.

Netflix shares closed down 1.7% at $68.69 in regular New York Stock Exchange trading Tuesday. After the earnings release, the stock fell a further 5.9% to $64.62 in after-hours trading, dropping below its 52-week low of $65.10.


yckim6452@heraldcorp.com