Netflix shares fell around 9% in pre-market trading on Friday after the streaming giant issued weaker-than-expected guidance for the third quarter, overshadowing an otherwise solid second-quarter earnings report.
Although the company posted a modest earnings beat and continued to report double-digit revenue growth, investors were disappointed by its cautious outlook, raising concerns about Netflix’s near-term growth trajectory.
Weak Third-Quarter Guidance Weighs on Sentiment
Netflix expects third-quarter earnings of $0.82 per share, below Wall Street’s consensus estimate of $0.84 per share.
The company also forecast third-quarter revenue of $12.86 billion, falling short of analysts’ expectations of $13.0 billion.
The softer outlook triggered a negative market reaction, with analysts noting that Netflix’s premium valuation leaves little room for signs of slowing growth.
“The quarter was a win for the bears, while the price of Netflix discounts multi-year deceleration,” Wolfe Research analyst Peter Supino said in a note.
Netflix To Publish Viewing Data Once a Year
Netflix also announced a significant change to its reporting practices.
Beginning January 2027, the company will publish its viewing-hours report only once annually, instead of twice a year. The move follows its decision in 2025 to stop reporting quarterly subscriber numbers.
According to Netflix, the change is intended to shift investor attention toward key financial metrics such as revenue growth and operating profit, rather than engagement statistics.
Second-Quarter Results Beat Profit Estimates
For the second quarter, Netflix reported adjusted earnings of $0.80 per share, narrowly beating analysts’ expectations of $0.79 per share.
Revenue increased 13% year-on-year to $12.56 billion, although it came in slightly below the consensus estimate of $12.58 billion.
The company attributed the growth to recent subscription price increases and continued expansion of its advertising-supported subscription tier.
“Our financial performance remains solid and we’re on track to meet our objectives for the year,” Netflix said in its letter to shareholders.
User Engagement Continues to Rise
Despite the weaker guidance, Netflix highlighted improving user engagement across its platform.
Subscribers watched more than 97 billion hours of content during the first half of 2026, marking a 1.5% increase from the second half of 2025 and a 1.9% rise compared with the first half of 2025.
The company believes its expanding advertising business, combined with its pricing strategy, will continue to drive long-term profitability.
Analysts Offer Mixed Views
Market reaction to the results was divided.
Bernstein analyst Laurent Yoon maintained that Netflix’s current valuation does not fully reflect its medium- and long-term growth prospects.
Meanwhile, Eric Clark, portfolio manager of the LOGO ETF and chief investment officer at Accuvest Global Advisors, argued that investors should focus on the upcoming fall content slate, when viewing engagement typically strengthens.
Clark also pointed to Netflix’s fast-growing advertising business, describing it as a high-margin segment capable of generating strong free cash flow, while emphasizing that the company’s core business remains fundamentally stable despite quarterly fluctuations.
Competition Continues to Intensify
Netflix continues to compete aggressively for viewers and advertising revenue against traditional media companies such as Disney, as well as digital platforms including YouTube and TikTok.
Investor sentiment was also dented by reports that Netflix explored acquiring Warner Bros. Discovery’s studio and streaming assets but ultimately did not pursue a deal.
Stock Remains Under Pressure
Despite remaining one of the world’s largest streaming platforms, Netflix shares have declined more than 40% over the past 12 months as investors reassess the company’s long-term growth prospects amid intensifying competition and slowing revenue momentum.
While the latest quarterly results demonstrated resilient earnings, healthy engagement and continued revenue growth, the weaker-than-expected third-quarter forecast ultimately overshadowed those positives, sending the stock sharply lower in pre-market trading.
Disclaimer
This article is for informational purposes only and should not be considered investment advice. Investors should conduct their own research or consult a qualified financial advisor before making investment decisions.