Netflix will report its second-quarter earnings on Thursday, with investors looking for signs that the streaming giant can reignite growth after its shares fell about 20% this year.
While Netflix has consistently outperformed expectations over the past few years, concerns over slowing engagement, moderating subscriber growth, and increasing competition have weighed on investor sentiment.
The company’s outlook for the second half of the year is expected to be the biggest catalyst for the stock, but some analysts are also saying that with a lack of hit programs, more investors are expecting Netflix to lower its full-year numbers.
Wall Street expects NFLX to report revenue of $12.57 billion for the quarter, representing year-over-year growth of about 13%, while earnings are projected at $0.79 per share, nearly 10% higher than the corresponding period last year.
The company beat analyst estimates in the previous quarter with revenue of $12.25 billion, up 16.2% year over year.
However, weaker earnings guidance and revenue forecasts that merely matched consensus disappointed investors.
Revenue growth in international markets will be under scrutiny
The biggest question heading into the earnings release is whether Netflix can return to faster revenue growth.
The market currently expects revenue growth of 13.5% year over year, slower than the 15.9% recorded in the same quarter last year.
Morningstar analyst Matthew Dolgin said investors would closely watch whether sales growth begins accelerating again or whether management raises its guidance for 2026.
“We believe total sales growth will likely need to return to about 15% to ease market fears that organic growth is slowing and prompt reacceleration,” Dolgin said.
He added that investors would also pay close attention to the contribution from domestic and international markets.
Price increases introduced in the United States are expected to support revenue this year, but any slowdown overseas could become a larger concern.
“We believe that if international growth slows, that’s a bad sign for future growth,” Dolgin said.
Strategy and acquisitions in focus
Beyond the headline numbers, analysts expect management commentary on long-term strategy to drive investor reaction.
Netflix has increasingly diversified beyond traditional streaming, expanding into live sports, entertainment events, and advertising.
Morningstar believes investors will be looking for updates on potential acquisitions and sports rights.
“We will look for any commentary on interest in NBCUniversal being spun out from Comcast or in going after bigger sports rights (like the NFL). Netflix seems to be on the hunt for acquisitions, shifting away from how they’ve historically run their business in an effort to reaccelerate growth,” Dolgin said.
Analysts believe such moves could help Netflix broaden its content offering while improving engagement and monetisation over the longer term.
Options market signals optimism ahead of earnings
The options market is signalling cautious optimism ahead of Netflix’s earnings announcement, with traders positioning for a potential upside surprise despite the stock’s 20% decline this year.
According to data from ThinkOrSwim as reported by CNBC, call option volumes outpaced puts by two-to-one during both Friday and Monday’s trading sessions.
By midday on Monday, traders were buying nearly three times as many call options as puts, while one of the most actively traded strategies involved selling at-the-money puts, a position that generally reflects confidence that the stock will hold above current levels.
Technical indicators are also attracting attention.
Netflix shares, trading around $75, are hovering near the level where the company abandoned its pursuit of Warner Bros. Discovery in February.
The stock is also testing key long-term support levels that some market participants believe could provide a floor.
“Netflix is now testing a rising 200-week moving average as well as the $70 prior resistance-turned-breakout level from late 2021,” Todd Gordon, founder and chief investment officer at Inside Edge Capital, said.
“Should this $70 technical support hold, it may be time to consider changing the channel back to NFLX.”
Options markets are currently pricing in a post-earnings move of about 7.6%, according to Cboe LiveVol data, broadly in line with the stock’s average realised move of 7.4% following earnings announcements over the past year.
Netflix shares have declined after each of its last four quarterly earnings reports, following gains after the preceding three announcements, suggesting investors remain cautious despite the recent increase in bullish positioning in the options market.
BofA reiterates Buy rating ahead of earnings
Bank of America remains among the most bullish brokerages on Netflix despite the recent correction.
The firm reiterated its Buy rating and maintained a $125 price target, implying roughly 70% upside from current levels.
According to Bank of America, much of this year’s decline reflects concerns over engagement trends, artificial intelligence’s impact on content creation, and heightened competition following recent consolidation in the media industry.
However, the brokerage argued that Netflix has repeatedly overcome similar periods of investor pessimism.
It noted that slowing subscriber growth in 2022 pushed the stock down more than 50%, before initiatives including paid sharing and the advertising-supported tier helped restore growth.
The analysts said management has “consistently demonstrated an ability to adapt to changing market conditions, execute effectively and create long-term shareholder value.”
Bank of America expects largely in-line quarterly results but believes stronger guidance or encouraging commentary on engagement and acquisitions could improve sentiment.
Engagement concerns remain
Morgan Stanley has taken a more cautious stance, lowering its price target to $90 from $115 while maintaining an Overweight rating.
The brokerage expects second-quarter results and third-quarter guidance to broadly match expectations, with the company likely reaffirming its full-year outlook.
Morgan Stanley also said it hopes to see a more aggressive share buyback programme.
While credit card data suggests subscriber churn increased after recent price hikes, the firm believes Netflix retains significant long-term pricing power.
It also expects the company’s growing portfolio of live events and sports programming to support engagement during the second half of the year.
Meanwhile, KeyBanc Capital Markets warned that investor expectations have become increasingly cautious.
“Given currency movement and a lack of hit programs, we believe more investors are expecting Netflix to lower full-year numbers,” analyst Justin Patterson said.
“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,” he said.
“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.”
KeyBanc also reduced its price target to $92, maintaining an Overweight rating.
With expectations relatively subdued after the stock’s decline this year, analysts say Thursday’s earnings may matter less than management’s outlook on growth, engagement and strategic priorities for the remainder of 2026.
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