Netflix Stock Falls Nearly 9% After Q2 Earnings

Netflix shares fell nearly 9% in after-hours trading Thursday even though the streaming company reported second-quarter revenue and earnings that were roughly in line with Wall Street estimates. The immediate problem was the outlook: Netflix’s third-quarter revenue and earnings forecast came in below analyst expectations.

The earnings release also gave investors a new transparency question to consider. Netflix said engagement remains healthy, but its detailed What We Watched report will move from twice a year to once a year beginning in 2027.

Netflix office at night with headline showing shares sliding nearly 9% after earnings

Key Takeaways

Netflix reported $12.56 billion in second-quarter revenue and diluted earnings of $0.80 per share.
Third-quarter guidance of $12.86 billion in revenue and $0.82 per share fell below Wall Street estimates of $13 billion and $0.84.
Netflix will publish What We Watched annually instead of twice yearly, even as first-half viewing hours grew 2%.

What Happened

Netflix generated $12.56 billion in revenue during the quarter ended June 30, a 13.4% increase from the same period last year. Diluted earnings were $0.80 per share, up from $0.72 a year earlier and one cent above the LSEG estimate cited by CNBC.

Net income rose to $3.40 billion from $3.13 billion. Operating income reached $4.19 billion, while operating margin was 33.4%. Netflix attributed its revenue growth primarily to membership gains, higher pricing, and increased advertising revenue.

Those numbers were close to expectations, but the forward guidance did not clear the bar investors had set. Netflix forecast third-quarter revenue of $12.86 billion, representing 11.7% year-over-year growth, and diluted earnings of $0.82 per share. Analysts surveyed by LSEG expected $13 billion in revenue and $0.84 per share.

The company also narrowed its full-year revenue outlook to $51 billion to $51.4 billion from the previous range of $50.7 billion to $51.7 billion. Management said the updated range remains consistent with its prior outlook and still represents expected annual growth of 13% to 14%. Netflix maintained its 31.5% operating margin forecast for 2026.

Why It Matters

The stock reaction shows how much attention the market is placing on Netflix’s next phase of growth. A quarter that was broadly in line was not enough to offset guidance showing revenue growth slowing from 13.4% in the second quarter to a projected 11.7% in the third.

Engagement is another major part of the debate. Netflix said members watched more than 97 billion hours during the first half of 2026, up 2% from a year earlier. That was slightly faster than the 1.5% growth recorded in 2025, despite competition for viewing time from the Winter Olympics and World Cup.

Starting in the first quarter of 2027, however, What We Watched will become an annual report. Netflix said the change is intended to separate viewing data from earnings and keep attention on revenue and operating profit. The company will continue publishing weekly Top 10 lists and title-level viewing information, but investors will receive the broad engagement report less frequently.

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What Traders Should Watch Next

The first number to watch is Netflix’s third-quarter revenue growth. The forecast calls for 12% reported growth, or 11% on a foreign-exchange-neutral basis, supported by membership growth, pricing, and advertising.

Advertising is the second key signal. Netflix reiterated that it expects roughly $3 billion in ad revenue this year, about double the prior year. Live programming, an expanded NFL slate, and new advertising tools are central to that target.

Margins also matter. Netflix kept its full-year operating margin forecast at 31.5% and projected a 33.2% margin for the third quarter. That gives traders a clear benchmark for judging whether slower top-line growth is still translating into expanding annual operating income.

Finally, watch how the stock behaves when regular trading resumes. After-hours moves can change quickly as more investors process the report. If you trade earnings reactions, define the setup and risk before entering, then record the outcome in a structured trading journal. Traders who want a simpler starting point can use the free trading journal template.