Netflix slides after earnings as analysts point to long-term growth
Netflix shares fell after second-quarter results missed some Wall Street targets, but analysts cited buybacks, ads and global reach as support.
By Daniel Okafor · Business Editor
3 min read
Netflix shares fell after the company reported second-quarter results that came in slightly below Wall Street’s revenue expectations and issued a softer-than-expected third-quarter outlook. The drop added to a selloff that Fortune reported has wiped out roughly one-third of the stock’s value since April, even as some analysts argue investors are discounting the company’s longer-term prospects.
Netflix reported second-quarter revenue of $12.56 billion, up 13% from a year earlier. That was just under the consensus analyst estimate of $12.58 billion, according to Fortune.
The company posted an operating margin of 33.4%, compared with 34.1% in the same period a year earlier. Netflix forecast third-quarter revenue of $12.86 billion, below Wall Street expectations of about $13 billion, and put its full-year revenue outlook at $51 billion to $51.4 billion while keeping its 31.5% operating margin target.
Netflix also said it would provide viewing-hours transparency reports less often. Fortune reported that investors have been focused on slower engagement trends as well as the company’s guidance.
The stock closed Thursday at $74.35, up 1% during regular trading but about 44% below its June 2025 all-time high, according to Fortune. After the earnings release, shares fell another 8% to 9% in extended trading.
Buyback draws analyst attention
Netflix bought back about $4.7 billion of its own shares during the quarter, the largest quarterly repurchase in the company’s history, Fortune reported. Eric Clark, portfolio manager of the LOGO ETF and chief investment officer at Accuvest Global Advisors, told Fortune’s CFO Daily that the buyback signaled management saw value in the shares during the decline.
Clark said Netflix still had $27 billion remaining under its repurchase authorization. He told CFO Daily that the company’s cash generation, margin progress and shareholder returns make the stock more attractive after it was largely left out of the AI-driven market rally.
On Netflix’s earnings call, CFO Spencer Adam Neumann said the company was not running the business for short-term quarterly results. Neumann said Netflix’s goal is to maintain revenue and profit growth over time.
Neumann also said Netflix has reached less than 45% of its roughly 800 million addressable households worldwide and accounts for about 5% of global TV viewing. He said those figures leave the company with room to grow, according to Fortune.
Ads, AI and retention remain in focus
Netflix co-CEO Ted Sarandos pointed to potential production savings from artificial intelligence, Fortune reported. He said “The American Experiment,” a five-episode documentary, used 17 minutes of AI-enhanced footage produced twice as fast and at half the cost, while Netflix expects to spend up to $20 billion on content this year.
Wedbush senior vice president of equity research Alicia Reese reiterated an outperform rating in a July 13 note, Fortune reported. Reese said higher ad loads, better targeting from Netflix’s in-house advertising platform and live sports could help ad revenue rise to about $3 billion in 2026 while supporting margin targets.
Reese also said new short-form publisher deals scheduled to launch Aug. 3 could help Netflix close some of its engagement gap with YouTube. She wrote that Netflix’s churn remains among the lowest in the industry and said viewers are spreading time across YouTube, social media, free ad-supported streaming services and podcasts rather than leaving Netflix over one program.
Clark told CFO Daily that the fall season could be important if engagement improves. He also said he would like Netflix to deliver stronger content quality, while arguing that demand for the service remains durable.
This story draws on original reporting from Fortune.