Netflix beats on Q2 earnings but a soft Q3 forecast sends the stock down 9%

Netflix cleared the quarter and stumbled on the outlook. The company posted second-quarter revenue of $12.56bn on Thursday, up 13% on the year, alongside earnings of $0.80 a share, a cent ahead of the $0.79 analysts had pencilled in. Then it guided the next three months lower, and the stock did the rest.

Third-quarter revenue is forecast at $12.86bn, growth of roughly 12% but short of the $13bn Wall Street had modelled. Projected earnings of $0.82 a share also trailed the $0.84 consensus.

Shares fell about 9% in after-hours trading, surrendering the calm that had followed April’s record buyback authorisation.

On the quarter itself there was little to complain about. Analysts had looked for roughly $12.58bn in revenue and $0.79 a share; Netflix delivered a whisker under the first and a penny over the second, with the operating margin broadly where it needed to be.

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The disappointment was an entirely forward-looking one, which is usually the harder kind to shake off.

The reaction was sharpened by where the stock had been. Shares had run up into the print, which left little room for a guide that merely met the moment rather than beating it, and the after-hours selling followed almost mechanically.

A 12% forward pace would be Netflix’s slowest quarterly growth in about three years. It is a reminder that the ad-supported tier, the engine the company has chosen for its next leg, is still ramping rather than replacing the subscriber-count story Netflix stopped telling in 2025.

Some of the slowdown is arithmetic. Netflix is now large enough that each additional point of growth takes more absolute revenue than it did when the crackdown on shared passwords was still adding tens of millions of accounts a year.

Advertising remains the swing factor. Netflix expects its ads business to bring in about $3bn this year, close to double the 2025 figure, though that is still a thin slice of a base heading toward $51bn.

The company has spent two years turning free viewers into paying or ad-watching ones, and those returns are now meant to show up in the growth rate.

Engagement, the metric Netflix would rather investors watch, held up. Members viewed more than 97 billion hours of content in the first half of 2026, up around 2% on the year.

Live programming, the splashier part of the slate, is expected to account for just over 5% of content spend but only about 1% of viewing hours.

The company has also leaned on generative AI to manage a swelling library, and said it would fold its ‘What We Watched’ report into an annual release rather than a twice-yearly one, a change it framed as keeping attention on revenue and operating profit. Fewer disclosures rarely read as confidence.

Profitability was the steadier line. Operating margin came in at 33.4%, down slightly on the year, and net income at $3.4bn, while free cash flow slipped to about $1.5bn from $2.3bn a year earlier as content spending resumed.

Netflix repurchased a record $4.7bn of stock during the quarter, a pace that keeps chipping away at the share count even as the multiple compresses.

It also narrowed its full-year guidance to between $51bn and $51.4bn, from an earlier range of $50.7bn to $51.7bn.

The full-year midpoint, near $51.2bn, was effectively unchanged. The narrowing tightened the range without moving the destination, which is what a company does when it is confident about the year and unsure about the timing within it.

Price is the other lever, and not a costless one. Dutch consumers are suing over subscription hikes, a sign of how much of the growth story now rests on charging existing members more rather than adding new ones.

The next read arrives in October, when Netflix reports third-quarter results against the guidance it set on Thursday. On the after-hours tape, investors have already made clear they would like to see it beaten.