Stock Crash: Netflix shares fall 10%, most since 2022, after earnings disappointment

Shares of streaming giant Netflix Inc. fell as much as 10% in regular trading on Wednesday, October 22, in response to its quarterly results that missed street expectations. This was the biggest single-day fall for the stock since April 2022.

Revenue stood at $11.51 billion, in-line with Wall Street expectations compiled by Bloomberg, the first time in two years that Netflix did not beat estimates on the topline front.

Operating income for the quarter stood at $3.24 billion, which was $400 million below the company's own forecasts. Analysts at JPMorgan Chase & Co. said the results “did not include as much upside as recent quarters.” The operating income took a hit as the company had to pay $619 million to settle a multi-year tax dispute with Brazilian authorities, dating back to 2022.

The company had identified the potential risk in previous filings – but not in its earnings guidance — and said it would have beaten forecasts if not for the expense. Future payments will be smaller.

Analysts also said that the results have raised concerns with regards to the sustainability of growth going in to 2026, more so, as the company is touted to be one of the suitors for parts of Warner Bros. Discovery Inc.

However, the company's guidance for the fourth quarter was better than expectations. It expects net sales of $12 billion, compared to expectations of $11.9 billion, while EPS is seen at $5.45, versus estimates of $5.42.

There are also concerns with regards to videos being generated by AI and a shift to free streaming platforms like YouTube and Roku. Netflix sought to address those concerns in its letter to shareholders, touting record subscriber engagement in the most recent quarter.

Netflix shares had hit a record high of $1,341.1 on June 30, but have drifted lower since. The 10% fall on Wednesday led to the stock ending at $1,117.

(With Inputs From Agencies.)