Brett Schafer, The Motley Fool
4 min read
Netflix‘s (NASDAQ: NFLX) heyday may be over. At least, that is what you might think after reading the barrage of news about the streaming video provider’s content struggles in 2026. Various content heads have been let go, and a rare round of layoffs has been implemented across the business.
Financial performance looks good, but CEO Ted Sarandos is reportedly frustrated that the company cannot produce new hit shows, leading to stagnation in watch hours in the key United States market. Shares are now down 50% from highs, even though it just posted record earnings.
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That could make it a great buy-the-dip candidate. Here’s why.
Revenue growth, but stagnant market share
In the third quarter, Netflix’s financial performance looked rock solid. Revenue was up 12% year over year to $12.9 billion, with a record operating margin of 34.6%. Free cash flow was $2.88 billion, which the company continues to use to repurchase its outstanding shares.
Despite this, the stock fell after the earnings report and is now in a roughly 50% drawdown. The culprit is fear over watch hours and total subscribers in the United States and globally. Netflix has been able to raise its revenue by increasing subscription prices for members, along with adding new advertising tiers.
However, it failed to report any growth in watch hours this quarter (management declined to provide a figure). Third-party sources say its market share of TV viewing in the United States has stagnated at around 8%, with YouTube pushing toward 15%. This has investors fearful that Netflix is losing its lead in the streaming wars. If viewers are not watching as much Netflix as before, it will be difficult for the company to implement more price hikes.
Embracing new content form factors
To try to get its mojo back, Netflix has reshaped its executive team for its core TV series and movie production studios. It is also moving heavily toward becoming a more comprehensive streaming service that can provide value to users of all types. These include additional sports investments, such as NFL games, live events, and reality TV series. More broadly, it is getting into casual content such as podcast talk shows and shorter series that can compete with TikTok for viewing hours.
