Netflix Stock Price Forecast: Q3 Earnings Beat Expectations but Shares Drop Over 6% Pre-Market, $65 Support Becomes Key

TradingKey - In pre-market trading on October 21 US Eastern Time, Netflix (NFLX) fell more than 6% in pre-market trading today to around $64.50 after reporting its financial results in the previous trading session. Technical analysis indicates that $65 serves as a key support level; if this level fails to hold, the stock will enter a deeper pullback.

Why Is Netflix Stock Falling? Q3 Earnings Beat Expectations, but Q4 Profit Guidance Becomes the Main Drag

Netflix reported third-quarter revenue of $12.874 billion, up 11.8% year-over-year, largely in line with the company's previous forecast of approximately $12.9 billion. Operating profit reached $4.459 billion, with an operating margin of 34.6%, up from 28.2% in the same period last year. Net income stood at $3.664 billion, while diluted earnings per share reached $0.87, topping market expectations of around $0.82. Free cash flow reached $2.884 billion.

Based on single-quarter metrics, revenue, profit, and margins showed no significant deterioration, but the post-earnings stock price reaction was primarily driven by weaker fourth-quarter guidance. The company expects Q4 revenue of approximately $13.442 billion, up 11.5% year-over-year, operating profit of $3.5 billion, an operating margin declining to 26%, and EPS projected at $0.67. This earnings forecast fell short of Wall Street expectations, reflecting increased content spending and other costs in the fourth quarter.

Notably, Netflix lowered its 2026 advertising revenue forecast from about $3 billion to around $2.7 billion. Although the company stated that advertising revenue would still grow by over 80% this year, the slower-than-planned rollout of its advertising product prompted adjustments to the full-year outlook. Meanwhile, Netflix recently laid off approximately 1,000 employees, representing about 6% of its total workforce, and restructured its content management team. Following the earnings release, co-CEO Ted Sarandos stated that the company "can do better," and management will refocus on the quality of shows and movies as well as user engagement in the U.S. market.

For the full year, Netflix still expects 2026 revenue of approximately $51.1 billion, up 13% year-over-year, with a full-year operating margin of about 31.5%. Therefore, the current stock price pressure stems primarily from future growth rates and fourth-quarter earnings expectations, rather than third-quarter actual results significantly underperforming expectations.

Netflix Stock Price Technical Analysis

Netflix weekly stock price chart, Source: TradingView

Looking at Netflix's weekly stock price chart, as the candlestick highs and lows continue to shift lower, the stock's overall trend exhibits a clear downward trajectory. Meanwhile, the Relative Strength Index (RSI) stands near 37.2, sitting in weak territory close to oversold levels, indicating that market sentiment remains bearish, although the likelihood of a rebound is gradually increasing.

Currently, due to a decline in Q4 earnings expectations, the stock plunged over 6% in pre-market trading today to trade below $65. If the stock price continues its pre-market momentum at today's open and closes below $65, further downside space will open up, potentially falling toward the support level at $58.5, and further down toward the support level at $54.

Conversely, if today's closing price can hold firm above $65, the stock will see a technical recovery rebound in the short term, with the potential to retest the recent rebound high of $73.07. Further up lies the resistance level at $75. If the stock price can break above and hold firm over $75, it will open up rebound space toward $80.