The wave of changes in Netflix’s leadership (the arrival of Peter Rice, the departure of Bela Bajaria and others) as well as the largest wave of layoffs since 2022 put the company on a new path – but to where?
That’s the question on Wall Street as the company prepares its latest quarterly results and the investor call planned after the close of trading on Tuesday.
Investors “need, in the near term, some indications of confidence in the growth trajectory that this powerful global platform should be able to provide,” said David Joyce of Seaport Research Partners. He and others suggest more live sports, a laser focus on advertising, expanded partnerships with third parties, continued experimentation with theatrical release and perhaps another merger and acquisition attempt once NBCUniversal is formed.
The Street is hungry for information on viewer engagement and the upcoming slate of original content, two Achilles heels of late. Following the Skydance merger, which made Netflix the bridesmaid in the pursuit of Warner Bros., this will be the giant streamer’s most important earnings report in years. Its stock, in part because of questions raised by Warner’s lawsuit, has crashed, with shares down 25% year to date and more than 40% in the past 12 months.
The approximately 1,000 job cuts, or 6% of the workforce, have reached the top of the organization chart. Cinema executive Dan Lin was ousted earlier Monday, along with his lieutenant Doug Belgrad and content chief Bajaria, a 10-year veteran. She was replaced by former Disney and Fox executive Peter Rice, while Netflix co-CEOs Ted Sarandos and Greg Peters “frame the narrative for the earnings call and beyond,” Joyce observed.
Analysts are projecting revenue of $12.8 billion for the quarter ended September 30, up 11.8% from the year-ago quarter, with earnings per share of 82 cents compared to 59 cents. But the numbers – assuming they are as expected – might be less critical than Sarandos and Peters’ comments. The first was particularly frank during a recent Bloomberg conference, saying that the audience was not growing as much as he would like.
Investors (and Hollywood actors) were surprised by Warner Bros’ offer and also noted that the summer did not see a seasonal rebound in engagement. Record-breaking broadcasts of the FIFA World Cup have eaten into the overall market, but even so, “fewer Netflix titles are capturing the highest levels of streaming engagement” as competition for time and attention continues to intensify, Citizens’ Matthew Condon wrote in a client note. With these layoffs, he added, “we believe the company is strategically realigning its spending to its highest priority initiatives, while seeking to improve engagement and revenue growth.”
He has a “Market Perform” rating on the stock (essentially a hold) “as we await a more definitive set of catalysts that we believe are capable of leading to sustained upward estimate revisions.”
Joyce said in a recent report that shares were so low that he recommended a “buy” but lowered his price target from $102 to $90. The title is “in a sort of waiting and demonstration period.”
TD Cowen’s John Blackledge also has a “buy” on the streamer with a price target of $100. He believes Netflix will be able to increase engagement and drive member growth and retention through “emerging engagement vectors” ranging from live sports to podcasts. “We expect strong results in 3Q26 and believe NFLX can maintain its medium-term financial objectives, including healthy revenue growth, margin expansion and increased FCF (free cash flow).”
Mergers and acquisitions are now on the table, especially after Paramount’s pursuit upended more than a quarter-century of aversion to major acquisitions from Netflix, which now ranks sixth in U.S. TV usage, pro forma for Skydance and pending the Fox-Roku mergers, Joyce says. A significant jump in market share could come from an acquisition of NBCUniversal, which will be spun off from Comcast next year, taking the streamer from 7.8% to 14.9%.
Rice, now Netflix’s chief content officer, “has a significant skill set running sports and entertainment programming for 20th Century Fox and Disney, after the latter acquired the former, and thus has experience merging the two companies’ content/programming operations, which could be helpful,” he notes.
Sports rights are key as Netflix competes for subscribers and advertising with rivals including DAZN, Amazon, Apple and YouTube. Netflix closed its 2026 schedule in August with almost doubled ad commitments due to strong demand for live streaming, including NFL, WWE, MLB and the 2027 Women’s World Cup. The streamer just acquired Spanish and Andorran rights to all 104 matches of the 2030 FIFA Men’s World Cup.
Third-party content partnerships and integrations are potentially attractive catalysts in the near term, particularly with Peacock or Fox One, which could bring premium live sports to the platform without a significant upfront investment in rights, Condon said.
Sarandos also highlighted Netflix’s partnership with TF1 in France as a new and promising model.
And the importance of Netflix’s ad execution is growing, Joyce noted. Rounds of streaming price hikes are pushing more viewers toward cheaper ad tiers, with significant international growth potential. The connected TV market is growing. The same goes for the creator and short-form video advertising market, another potential growth area for the streamer. It could also just add more inventory.
Netflix forecasts $3 billion in advertising revenue this year.
In theaters, the streamer launched a major experiment last weekend with much longer windows and official box office reports. He opened the award-winning Spanish film The Black Bola in limited release with a 45-day window and has a handful of others, including high-profile, full-length releases geared up for theaters.
Management is hesitant to call this a change in strategy and appears to be focused on evaluating each film individually, balancing moviegoer demand with the potential impact on Netflix viewing, Condon noted. He believes theatrical releases can help create greater fandom around Netflix’s intellectual property and strengthen the platform — a case movie theater owners have been pushing for years.
Gn bussni
