Netflix NFLX stock fell more than 8% in after-hours trading on Thursday as the company missed second-quarter 2026 revenue expectations and issued lower guidance for 2026. Investor skepticism remains high amid competitive pressures and a failed Warner Bros. Discovery acquisition bid.
The company reported second-quarter 2026 earnings per share of 80 cents, which increased 11.1% from 72 cents reported in the year-ago quarter. The figure beat the Zacks Consensus Estimate by 1.27%.
Quarterly revenues increased 13.4% year over year (12% on an F/X-neutral basis) to $12.56 billion, in line with the company's forecast. The figure missed the consensus mark by 0.1%.
Management attributed the revenue growth primarily to membership growth, pricing and increased advertising revenues, with double-digit revenue growth delivered across all regions. Netflix continues to withhold quarterly membership numbers.
Revenue growth was strongest in Latin America (up 21% year over year, or 16% F/X-neutral) and Asia-Pacific (up 16%, or 18% F/X-neutral), followed by EMEA (up 14%, or 11% F/X-neutral) and the United States and Canada (up 10%). Management noted that UCAN growth reflected only a partial-quarter impact from its recent price change, which it said "has gone well and as expected."
The company reiterated that its first-half price changes across markets, including the United States, Mexico and Spain, performed consistently with prior increases and internal expectations. Advertising revenues remained on track to reach roughly $3 billion in 2026, about double the 2025 level.
Netflix, Inc. Price, Consensus and EPS Surprise
Netflix, Inc. price-consensus-eps-surprise-chart | Netflix, Inc. Quote
NFLX Profitability Reflects Higher Content Amortization
Operating income rose 11% year over year to $4.19 billion. Operating margin came in at 33.4%, down from 34.1% in the year-earlier quarter, though slightly ahead of the company's own forecast due to the timing of expenses. The operating income grew slower than revenues because content amortization growth is front-loaded in the first half of the year; amortization is expected to decelerate in the back half and rise about 10% for full-year 2026.
Net income for the quarter was $3.4 billion, up from $3.13 billion a year ago. The letter noted that free cash flow and cash tax payments in the quarter were affected in part by the terminated Warner Bros. transaction, for which Netflix had recognized a $2.8 billion termination fee in the first quarter.
NFLX Cash Flow Declines on Higher Cash Taxes
Net cash provided by operating activities was $1.74 billion in the quarter, down from $2.42 billion a year earlier. Free cash flow fell to $1.53 billion from $2.27 billion in the prior-year quarter, which the company attributed to higher cash tax payments, due in part to the Warner Bros. termination fee. For the full year, Netflix continues to expect free cash flow of approximately $12.5 billion and a cash content spend-to-amortization ratio of roughly 1.1x.
On the balance sheet, Netflix ended the quarter with $9.1 billion in cash and cash equivalents and $14.4 billion in gross debt (non-GAAP net debt of $5.2 billion). The company has $1 billion of debt maturing later this year, which it plans to refinance. In April, Netflix's board authorized an additional $25 billion in share repurchases on top of the $6.8 billion of capacity remaining at the end of the first quarter. Netflix repurchased $4.7 billion of stock in the quarter — its largest quarterly buyback on record — leaving $27.1 billion remaining under its authorization.
NFLX Narrows 2026 Guidance
Netflix narrowed its full-year 2026 revenue outlook to $51.0-$51.4 billion (from $50.7-$51.7 billion previously), suggesting 13-14% growth, while maintaining its operating margin target of 31.5%. For the third quarter, the company forecasts revenues of $12.86 billion, reflecting 12% growth (11% F/X-neutral), and an operating margin of 33.2%, versus 28.2% in the year-ago quarter. Management said the second quarter marked the highest year-over-year content amortization growth rate expected in 2026, with deceleration to mid-to-high single-digit growth anticipated in the second half.
Notable Q2 2026 Developments
Netflix made a significant change to how it discloses engagement, announcing that after releasing its semi-annual "What We Watched" report for the first half of 2026 — which showed members watched more than 97 billion hours, up 2% year over year despite competition from the Winter Olympics and World Cup — it will shift to publishing the report annually, starting in the first quarter of 2027. The company said the goal is to keep quarterly earnings focused on its primary financial metrics of revenue and operating profit, though it will continue reporting weekly Top 10 lists and title-level view-hours data.
Zacks Rank & Stocks to Consider
Currently, Netflix carries a Zacks Rank #4 (Sell).
AMC Entertainment AMC, Travel Leisure Co. TNL and Caesars Entertainment CZR are some better-ranked stocks that investors can consider in the broader Consumer Discretionary sector, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMC Entertainment, Travel Leisure Co. and Caesars Entertainment are set to report their quarterly results on July 20, July 22 and July 28, respectively.
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