Shares of Netflix (NFLX) fell over 8% in after-hours trading due to a disappointing third-quarter outlook and engagement trends that did not meet expectations. The company reported second-quarter revenue of $12.56 billion, growing 13.4% year-over-year but slightly below the Bloomberg estimate. Earnings per share were $0.80, marginally exceeding expectations.
Netflix anticipates third-quarter revenue at $12.86 billion, lower than analysts’ $13 billion estimate, and expects earnings per share of $0.82, again below the $0.84 forecasted. Full-year revenue projections for 2026 are estimated between $51 billion and $51.4 billion, consistent with previous guidance.
Regionally, growth in the U.S. and Canada slowed to 10%, with only Latin America showing accelerated growth. Analysts note a general slowdown in engagement, with one commenting that the management’s plans to stimulate business lack clarity. However, hours watched hit a record of over 97 billion in the first half of 2026.
Netflix aims to enhance viewer engagement through short-form content partnerships starting August 3 and is considering a free tier in the future, although no immediate plans are in place. The advertising business is projected to reach $3 billion in revenue by 2026.
Notably, Netflix’s free cash flow declined significantly year-over-year, primarily due to increased tax payments related to its withdrawal from a planned acquisition of Warner Bros. Discovery. The company is also leveraging generative AI in its production processes, enhancing creative capabilities without replacing human artists.
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