Netflix Heads Into Earnings With Its 2022 Playbook Already Spent

Netflix reports second-quarter results this afternoon with its stock down 18.7% this year and trading at levels last seen 21 months ago. Wall Street expects $12.58 billion in revenue and 79 cents a share, a 13.5% jump from last year. Numbers post at 1:01 p.m. Pacific time, with co-CEOs Ted Sarandos and Greg Peters fielding analyst questions live 44 minutes after that.

Netflix has been here before. It solved a nearly identical engagement scare in 2022 with an ad-supported tier and a crackdown on password sharing. Both fixes are already years old, and a Wall Street Journal report last week revealed executives are now weighing live TV channels and outside streaming bundles to do the job a second time.

The Guidance Netflix Already Gave

None of Thursday’s numbers should surprise anyone who read Netflix’s April letter to shareholders. The company told investors then to expect an operating margin of 32.6% for the quarter, down from 34.1% a year earlier, because content amortization costs are loaded into the first half of 2026.

Full-year targets have not moved. Netflix still expects $50.7 billion to $51.7 billion in revenue and a 31.5% operating margin for 2026, and it actually raised its free cash flow guidance to about $12.5 billion from $11 billion.

That bump traces to a one-time source: the termination fee Netflix collected after walking away from its pursuit of Warner Bros. Discovery earlier this year. The same fee inflated the March quarter’s headline profit of $1.23 a share, which included a $2.8 billion gain booked outside normal operating income. Strip that out and the underlying business grew revenue 16%, with operating margin up six-tenths of a point.

Shares were changing hands around $74 this week, inside a 52-week range of $70.86 to $127.75.

A Leak Landed Before the Numbers Did

Six days before the earnings release, the Wall Street Journal got there first. Its July 10 report described Netflix executives flagging falling engagement as a recurring topic at the company’s own spring business review, even as profit climbed and churn stayed at industry lows.

Shares dipped in premarket trading on the news, then recovered within the same session.

The Journal tied the concern to a specific fix. Netflix has been looking at adding live TV channels and bundling in outside subscription services such as Peacock, according to the report.

Matthew Condon, an analyst at Citizens, said slowing engagement and rising churn would erode Netflix’s core structural advantage. That, he said, is “ultimately what is prompting Netflix to explore Live TV and subscription bundle partnerships.”

Consolidation elsewhere in media adds to the pressure. Fox is acquiring Roku in a deal valued at roughly $25 billion, and Paramount is working to close its own merger with Warner Bros. Discovery.

Price Cuts Without a Single Downgrade

Almost every major bank cut its price target this week. None of them downgraded the stock.

Morgan Stanley kept its Overweight rating while cutting to $90 from $115. Citi held its Buy rating too, trimming to $100 from $115.

Bernstein’s Laurent Yoon cut to $100 from $110 while keeping an Outperform rating. “There’s a lot riding on the second quarter as Netflix faces no shortage of near and longer-term questions,” he wrote, adding that the high end of revenue guidance “could be at risk.”

Evercore ISI’s Kutgun Maral described “dislocation” in the stock “caused by concerns about rising competition (especially from YouTube), concerns about tough second-half comparisons, concerns about market maturity and concerns about plateauing engagement,” while keeping an Outperform rating and a $115 target.

Across Wall Street, NFLX still carries a Strong Buy consensus built on 24 Buy ratings and 8 Holds over the past three months, with an average price target of $110.71.

Netflix Solved This Exact Problem in 2022

This isn’t Netflix’s first engagement panic. Subscriber growth stalled in 2022 and the stock lost more than half its value before two fixes turned things around: an ad-supported tier that went live on November 3, 2022, and a crackdown on password sharing that followed.

Engagement has not collapsed in the meantime. Members logged 96 billion hours in the back half of 2025, Netflix’s own engagement report shows, up 2% from a year earlier.

Bank of America draws the parallel to 2022 directly.

The narrative around Netflix reminds us of 2022, as concerns around engagement have evoked concerns around long-term growth and driven P/E multiple compression. 2022’s challenges were addressed with an ad-tier and paid sharing. This time around, we believe levers will likely center around content and product diversification (both through TF1-type partnerships and live events) that aid perceived content quality and support better monetization per hour.

Jessica Reif Ehrlich, Bank of America’s media analyst, wrote the note this week, reiterating a Buy rating and a $125 price target, the highest of any bank tracked here. She pointed to the mechanics behind the last recovery: slowing subscriber growth in 2022 pushed the stock down more than 50% before paid sharing and the ad tier restored it.

Is Netflix’s Ad Business Outrunning Its Engagement Problem?

Wedbush Securities says yes, arguing advertising is scaling faster than engagement is slipping on the back of higher ad loads, better targeting and live-sports pricing power. Bernstein and Evercore are less convinced, warning that plateauing viewership and tougher year-over-year comparisons could still outpace whatever the ad business adds this year.

Alicia Reese, an analyst at Wedbush Securities, made the case explicit in a note headlined “The Ad Business Is Outrunning the Engagement Story.”

She didn’t dismiss the bear case. “Elements of the bear case are real: U.S. engagement has plateaued, headline CPMs appear to be in decline, and the stock is down roughly 40 percent since Q1 results and Reed Hastings’ departure from the board,” Reese wrote. Cost per mille, the price advertisers pay for every 1,000 ad views, is falling “as supply grows, but not because advertisers are pulling back,” she added.

Reese also flagged new survey data: ad-tier subscribers now show higher intent to stay with Netflix than premium subscribers do, the first time her firm’s tracking has shown that crossover.

Seeking Alpha’s Andres Veurink rates the stock a Strong Buy on similar logic, pointing to strong operating leverage, low churn and ad revenue he expects to roughly double toward $3 billion this year. “Netflix is currently targeting a 100% increase in advertising revenue driven by price hikes and a larger user base,” Veurink wrote. He added that for 2026, “NFLX guided for an additional $6 billion in revenue, so about $1.5 billion of that is expected to come from ads and their expansion.”

Bernstein’s Yoon put the same question more simply: “Can advertising offset subscriber growth pressure?”

A Back Half Without Stranger Things

Guggenheim’s Michael Morris put a number on the gap. Viewing hours in the second half of 2025 got a lift from three concentrated launches, including Stranger Things Season 5’s more than 59 million views in its first week, alongside Squid Game Season 3 and Wednesday Season 2.

“The second-half 2026 slate delivers franchise depth (Outer Banks S5, The Gentlemen S2, Enola Holmes 3, expanded NFL, and MLB Field of Dreams) but no single tentpole on the scale of Stranger Things,” Morris wrote, maintaining a Buy rating and a $120 price target.

Evercore’s Maral points to four places growth could come from instead.

• Original content quality – continued investment in flagship scripted series to hold viewers’ attention
• Live sports expansion – building on the current NFL package and World Cup push into more live events
• Short-form content – a new format aimed at competing with YouTube and TikTok for daily attention
• International ad markets – expansion into 15 new countries for the advertising business

Netflix told shareholders in January to expect operating margin growth in the third and fourth quarters to hit the 2026 target, a pledge that puts real weight on the back half even without a hit the size of last year’s finale.

Thursday’s print posts at 1:01 p.m. Pacific time, with Sarandos and Peters on camera 44 minutes later.

Frequently Asked Questions

Why did Netflix stop reporting subscriber numbers every quarter?

Netflix retired routine quarterly subscriber disclosures starting in 2025, shifting its reporting toward revenue, margin and engagement metrics instead. Company filings describe an audience approaching one billion people globally across more than 325 million paid memberships, treating that figure as a floor rather than a fresh count each quarter.

How much does Netflix’s ad-supported plan cost, and how fast is it growing?

The ad-supported plan costs $8.99 a month in the US. It made up over 60% of new sign-ups within ad countries during the first quarter of 2026, according to the company’s own shareholder letter.

Which region brings in the most revenue for Netflix?

Europe, the Middle East and Africa now counts more paid memberships than the United States and Canada, but the US and Canada region still produces the highest revenue per member by a significant margin.

Is Netflix still trying to buy Warner Bros. Discovery?

No. Netflix stepped away from its pursuit of Warner Bros. Discovery earlier this year and collected a termination fee that helped push its 2026 free cash flow guidance up to about $12.5 billion. Paramount is now working to close its own merger with Warner Bros. Discovery despite pending lawsuits.

How does Netflix’s valuation compare with other media stocks?

Netflix trades at about 6 times forward 12-month sales, compared with a 3.98 times average for the Zacks Broadcast Radio and Television industry.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Stock ratings, price targets and financial figures reflect analyst estimates and company guidance available as of publication and are subject to change. Consult a licensed financial professional before making investment decisions.