Netflix guides to slower growth as new formats remain small

Netflix (NFLX) guided for 12% revenue growth in the third quarter of 2026, a slowdown from the 13.4% reported in the most recent quarter, while management continues to emphasize live events and games that currently constitute a small fraction of viewing hours. The stock has lost 42% in the twelve months to September 30, 2026, a period in which the S&P 500 rose 14.4%. This divergence highlights a shift in how the company describes its business to investors, moving away from a sole focus on hit films and series toward a broader definition of entertainment that includes live programming and interactive content.

On its fiscal Q3 2024 call, management described Netflix as a subscription entertainment business focused on improving its core film and series offering, promising a steady drumbeat of hit titles. Two years later, the fiscal Q2 2026 call held on July 16, 2026, revealed a different pitch. Management stated that the definition of TV has broadened and that Netflix is adding to its slate of live events and scaling up cloud games. Video podcast viewing has also been added to the mix, with management noting it comes on top of other viewing.

Despite the strategic pivot, the operational scale of these new formats remains limited. Management expects live programming to account for 5% of the content budget in 2026 but only 1% of viewing hours. While cloud games have seen rapid adoption, with monthly active players growing elevenfold in the eight months prior to the July call, no revenue figures for live events, games, or podcasts were provided during that earnings call. The core revenue engine remains memberships, pricing, and higher ad revenue. Viewing hours grew 2% in the first half of 2026, which management characterized as a slight acceleration from 2025.

The company’s full-year guidance of 13% to 14% implies a pickup in revenue growth for the fourth quarter. However, the emphasis on newer formats raises questions for holders given their current size relative to total viewing. Live events do drive sign-ups; management noted that six of the top ten sign-up days in the past five years came from live events. These events may also bring slightly higher churn. Wells Fargo analysts cut their rating on Netflix on September 18, 2026, stating that the stock needs breakout hits to perform well again, a focus that aligns with the company’s earlier pitch.

Netflix posts its third-quarter 2026 results on October 20, 2026. The newer formats are currently too small to offset the guided slowdown in revenue growth. Revenue growth below the guided 12% would indicate a deceleration beyond management’s expectations, while viewing hours growing faster than 2% would serve as a positive indicator.