Netflix Stock Slips as Guidance and Free Cash Flow Miss Expectations

That wraps up our initial coverage of Netflix’s Q2 results. Thank you for stopping by!

Netflix continues to grow, with second-quarter revenue reaching $12.56 billion, net income totaling $3.4 billion, and EPS of $0.80 narrowly beating the $0.79 estimate. The company also expects advertising revenue to roughly double to $3 billion in 2026.

The problem was guidance. Netflix expects third-quarter revenue of $12.86 billion and EPS of $0.82, below estimates of $13.01 billion and $0.84, respectively.

For a stock carrying a premium valuation, continued growth is not enough when Wall Street expects even more.

The sell-off now raises the question for investors: Is Netflix undergoing a healthy valuation reset, or is the pullback creating a long-term buying opportunity?

Overall Grade: B-. Netflix (NASDAQ:NFLX) beat EPS but missed on revenue, free cash flow, and Q3 guidance, muting the rebound narrative built up during earnings week.

Resilient top-line growth and strong margins collide with softer forward metrics.

The aggressive buyback signals conviction, while FCF pressure gives bears ammunition heading into the 4:45 PM ET call.

Netflix still expects ad revenue to roughly double year over year to about $3 billion in 2026, providing another growth engine alongside pricing and global subscriber engagement.

Netflix reported more than 97 billion viewing hours during the first half, up 2% year over year.

Regional growth was broad-based, led by a 21% revenue increase in Latin America, followed by 16% growth in Asia-Pacific, 14% in Europe, the Middle East and Africa, and 10% in the United States and Canada.

Netflix just reported Q2 earnings, with shares initially up 2% following the report. Here are the key numbers:

• Revenue: $12.56 billion vs. $12.58 billion expected
• EPS: $0.80 vs. $0.79 expected

Quick Read:

Netflix delivered a small EPS beat, although revenue fell slightly short of Wall Street’s expectations.

Revenue still increased 13% year over year, while EPS rose 11%, signaling that the company’s underlying growth remains healthy.

Netflix (NASDAQ:NFLX) reports Q2 earnings tonight at 4:05 PM ET, with shares at $73.72 and down 21.42% YTD.

Bull Case

• Ad revenue tracking to roughly double to about $3 billion in 2026, with the advertiser base up over 70% year over year.
• Reaffirmed FY operating margin of 31.5% on 12% to 14% revenue growth.
• Polymarket now assigns a 59.5% beat probability, and July 17 call volume outpaces puts 2.46:1.

Bear Case

• Q1 EPS missed by -8.55% even with the Warner Bros. windfall.
• Content amortization peaks in Q2, threatening margins.
• Misses have averaged a -9.89% day-of drop, and insiders are net sellers across 110 recent transactions.
• Valuation remains full at a 24 P/E.

With shares at $73.72 and down 21.42% YTD, Netflix’s Q2 earnings call at 4:45 PM ET tonight will help to set the tone for the back half of the year.

Top Analyst Questions:

1. Is ad revenue on track to reach the $3 billion 2026 target?
2. How is capital being deployed post-Warner Bros., with $6.8 billion in buyback authorization remaining?
3. Has content amortization truly peaked?
4. What are early Netflix Playground and vertical-feed engagement metrics?
5. Any update on the Brazilian ~$700M tax dispute?

Key Topics:

Free-trial reintroduction, Spain price hike, Mercado Libre bundle, InterPositive GenAI integration.

Buzzwords:

“incrementality,” “conversational discovery,” “operating leverage,” “engagement per member.”

Red Flags:

Guidance below the 32%-34% margin consensus, softer H2 ad ramp, or hedged language on Lionsgate M&A speculation.

With Netflix (NASDAQ:NFLX) set to report after the close, the Q1 setup remains the single most important frame for interpreting tonight’s numbers.

Here are 3 of the most important items from the April call to keep in mind ahead of tonight’s Q2 earnings:

Last Quarter’s Top 3 Takeaways:

• Capital return posture flipped back to normal. After walking away from the Warner Bros. deal, Netflix booked a $2.80 billion termination fee and resumed buybacks, repurchasing 13.5 million shares for $1.3 billion with $6.8 billion remaining. With shares now near $74.26, pace-of-buyback commentary matters more than usual.
• The ad tier inflected faster than the Street modeled. Ad-supported plans drove over 60% of sign-ups in ads countries, the advertiser base grew over 70% year over year to more than 4 thousand advertisers, and management reiterated the $3 billion ad revenue target. Any wobble tonight would dent the core bull thesis.
• Q2 is the margin trough, by design. Content amortization was flagged to peak in Q2 before decelerating to mid-to-high single digits in the back half, with the Q2 operating margin guide set at 32.6% on revenue of roughly $12.574 billion. FCF guidance was also raised to ~$12.5 billion from $11 billion, so any print above the 32.6% line would signal Q1’s confidence was, if anything, understated.

Prediction markets currently assign a 60.5% probability of a miss, with 66.5% clustering around a 32%-34% operating margin outcome.

This live blog is being updated by Thomas Richmond, a 24/7 Wall St. contributor. You’ll get expert analysis of Netflix’s Q2 earnings.

Simply stay on this page, and new updates will appear below automatically. We expect Netflix to release earnings shortly after 4:05 p.m. ET.

Netflix (NASDAQ: NFLX) heads into tonight’s earnings report with Wall Street and prediction markets telling two very different stories.

The company is targeting roughly $12.57 billion in second-quarter revenue and a 32.6% operating margin, even as content amortization is expected to peak during the quarter.

Advertising remains the clearest potential catalyst, with ad revenue reportedly on track to double to approximately $3 billion in 2026.

Wall Street analysts maintain an average price target of $112.17, implying 51.5% upside. However, prediction markets assign Netflix a 60.5% probability of missing expectations, with $70 emerging as the most likely post-earnings share price.

A clean beat on advertising revenue and operating margin would revive Netflix’s long-term compounding narrative, but weakness in either metric would strengthen the bear case.

Netflix is also looking to overcome concerns that audiences for viral shows can decline 30% to 70% between seasons.