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Netflix Shares Drop 10% as Investors Worry Over Valuation and Growth Outlook

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Netflix shares fell more than 10% on Wednesday after the company’s fourth-quarter forecast failed to impress investors, despite a slate of blockbuster titles including the final season of Stranger Things. The decline reflects growing concern that the streaming giant’s valuation — now trading at nearly 40 times forward earnings — has become unsustainably high.

The company reported third-quarter revenue of $11.5 billion, in line with expectations, and forecast $11.96 billion for the next quarter. However, investors were left uneasy by the lack of subscriber metrics since Netflix stopped reporting them earlier this year. Analysts said the market is looking for stronger signals of growth to justify the company’s lofty market position after a 360% stock surge over the past three years.

Netflix’s advertising and gaming divisions, launched to diversify its income, have yet to become major revenue drivers. Still, the company recorded its strongest ad sales quarter ever, without disclosing figures. A $619 million tax-related charge in Brazil also dragged down profits.

Analysts at Wedbush called Netflix’s outlook “underwhelming,” while Evercore ISI suggested buying the dip, noting rival platforms Disney+ and HBO Max have raised prices — potentially giving Netflix room to do the same.

SAP Misses Q3 Revenue Estimates as Cloud Growth Slows, Shares Drop

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German enterprise software giant SAP reported third-quarter revenue slightly below analyst expectations, sending its U.S.-listed shares down 3% in after-hours trading. The company posted revenue of €9.08 billion ($10.59 billion), a 7% year-on-year increase but short of the €9.17 billion forecast by analysts, according to LSEG IBES data.

SAP’s cloud business, a key growth driver, rose 22% — its slowest pace since late 2023. CFO Dominik Asam said the company “maintained forward momentum despite an uncertain macroeconomic backdrop.” SAP has been shifting from traditional software licenses to a subscription-based cloud model, seeking more stable long-term revenue streams.

Non-IFRS operating profit grew 14% to €2.57 billion, slightly above estimates, while free cash flow increased 5% to €1.27 billion. Looking ahead, SAP expects 2025 cloud revenue to reach the lower end of its forecast range (€21.6–21.9 billion), but operating profit is anticipated at the upper end (€10.3–10.6 billion). Free cash flow guidance was raised slightly to between €8 billion and €8.2 billion.

Lam Research Forecasts Higher Revenue Amid Strong AI Chipmaking Demand

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Lam Research has projected second-quarter revenue above Wall Street expectations, driven by surging demand for semiconductor manufacturing tools used in artificial intelligence applications. The Fremont, California-based firm said it expects revenue of around $5.20 billion, plus or minus $300 million, for the quarter ending December 28 — ahead of analysts’ forecasts of $4.81 billion, according to LSEG data.

The company’s shares rose 2.2% in after-hours trading and have already doubled this year, fueled by global investment in AI-driven chip production. Lam, a leading supplier of wafer fabrication equipment (WFE), provides critical tools used in the complex processes of chip wiring and wafer etching.

Lam faces competition from industry heavyweights such as Applied Materials, Analog Devices, and ASML, but remains well-positioned as chip designers expand capacity to meet escalating computing demands. The firm reported $5.32 billion in revenue for the previous quarter, surpassing expectations, and adjusted earnings of $1.26 per share versus $1.22 projected. The AI semiconductor boom continues to lift equipment makers across the global chip supply chain.