Netflix shares fell sharply on Tuesday after the company reported third-quarter operating margins that disappointed Wall Street, with executives attributing the pressure to heavy investment in live programming and artificial intelligence tooling. The results, released after Monday's close, overshadowed solid subscriber additions.

Co-chief executives Ted Sarandos and Greg Peters defended the spending on a call with analysts, arguing that live events and sports-adjacent programming were central to the company's engagement strategy. The earnings followed a 6 percent workforce reduction announced earlier in October, which the executives linked to an AI-driven restructuring of production and operations.

Analysts at Morgan Stanley and MoffettNathanson had flagged margin risk ahead of the report, noting that Netflix's push into live content carries higher variable costs than its scripted library. The company's fourth-quarter guidance did little to reassure investors focused on profitability rather than top-line growth.

The sell-off reflected broader concern that streaming's cost base is rising even as subscriber growth in mature markets slows. Netflix had been among the best-performing large-cap media stocks of the year, making the pullback more pronounced among momentum-focused funds.

Sarandos told analysts the company remained confident in its long-term strategy. "We are investing where the engagement is, and live is where the audience is going," he said, according to the earnings call transcript.