Netflix: profit up 49%, stock down 45% in a year. How?

On October 20 Netflix reported its third quarter. The numbers were not bad — quite the opposite: earnings per share rose 49% year over year. Yet over the same year the stock fell 45%. How can both be true?

NetflixUSA

What the report says

From the shareholder letter (SEC):

• Revenue — $12.9 billion, up 12% from a year earlier;
• Earnings per share (EPS) — from $0.59 to $0.87 (+49% by the company's count);
• Operating margin — from 28.2% to 34.6%: out of every 100 dollars of revenue, 34.6 dollars are left as operating profit.

In other words, the company is earning more and keeping costs under better control.

But: the cheaper plan with ads

For several years Netflix has offered a cheaper plan with ads: the subscription costs less, but ads play between shows. The company had big hopes for it — about $3 billion of ad revenue in 2026.

The new report cut that outlook to $2.7 billion. The reason, in the letter's words: a slightly slower than expected rollout of some ad product capabilities. The ad plan is set to launch in 15 more countries starting in March 2027.

300 million dollars is small next to total revenue. But for investors it is a signal about a future growth engine: the new engine is not running as fast as hoped.

The stock over a year

According to Yahoo data (prices adjusted for the 10-for-1 split of November 2025):

• October 20, 2025 — close $123.86;
• October 20, 2026 — pre-report close $68.69.

That is −45% in a year — while the company's profits kept growing.

Why this happens

A stock price reflects not today's profit but tomorrow's expectations. A year ago investors expected very fast growth from Netflix and paid a high price for it. Then growth showed signs of slowing and the ad plan fell behind — expectations came down, and so did the price.

This is common:

• A good report ≠ a rising stock. If results are not better than expected, or guidance is cut, a stock can fall even after a "good" report.
• A high price means high expectations. The higher the price, the harder even a small disappointment hits.
• Look at the guidance. Besides last quarter's numbers, a report includes the company's outlook for the next period — the market often reacts to that.

What to watch

• Ad revenue — whether the $2.7 billion outlook holds in coming reports;
• 2027 guidance — usually given with the January report.

For information only — not investment advice. Figures refer to the stated dates; check the sources for current values.