Netflix reported second-quarter revenue of about $12.56 billion, up roughly 13% from a year earlier, and net income of $3.40 billion, or 80 cents per diluted share. Analysts had modeled 79 cents on revenue near $12.58 billion. The company beat on earnings by a penny and missed on revenue by about $20 million.
Shares fell 9% after the close.
That reaction is the story. A company growing revenue at 13% with an operating margin of 33.4% is, by any conventional measure, performing well. Netflix’s operating income for the quarter came in at $4.19 billion. The business is not in trouble. The market has simply stopped grading it on the curve it used for the last decade.
The guidance did the damage
Netflix told investors to expect third-quarter revenue growth of about 12%, or roughly $12.86 billion, a slower pace than recent quarters. It also narrowed full-year guidance to a range of $51.0 billion to $51.4 billion, tightening by $300 million on each end from a prior range of $50.7 billion to $51.7 billion.
Narrowing a range is normally a sign of confidence. In this case it confirmed a ceiling. The company is on track to finish the year almost exactly where it said it would, and the market wanted more.
Engagement is the pressure point
Alongside earnings, Netflix released its semiannual viewership report. Subscribers watched about 97 billion hours in the first half of 2026, an increase of roughly 2% over the same period in 2025 — an improvement on the 1.5% growth in the prior comparable stretch, achieved despite competition from the Winter Olympics and the World Cup.
Two percent growth in hours against 13% growth in revenue tells you where the money is coming from: price increases and advertising, not deepening engagement. Netflix raised prices across all three U.S. plans earlier this year, its second increase in barely more than a year. The advertising business remains on track for roughly $3 billion in 2026, double the 2025 level, with U.S. upfront negotiations described as being in advanced stages.
The company also said it will stop publishing the viewership report twice a year, shifting to an annual release beginning in 2027, so that attention stays on revenue and operating profit. Title-level and total view-hours data will continue.
Critics have argued Netflix is losing ground to YouTube and TikTok for the hours that matter most. Publishing engagement data less often will not settle that argument in the company’s favor.
Live events, small spend, large effect
One number worth holding onto: live programming is expected to account for just over 5% of Netflix’s content spend this year and about 1% of view hours. Yet six of the company’s top ten new member sign-up days over the past five years came from live events — a category it only entered in 2023.
That is an unusually efficient acquisition channel, and it explains the direction of travel: an expanded NFL slate, WWE, MLB events, and the 2027 FIFA Women’s World Cup.
The overhang
Netflix shares are down roughly 21% this year and about 45% over the past twelve months, sitting at an 18-month low. Some of that reflects skepticism about engagement. Some of it reflects February, when Netflix was outbid by Paramount Skydance for Warner Bros. Discovery and walked away with a $2.8 billion termination fee instead of a film library.
The company returned $5.9 billion to shareholders through buybacks in the first half and holds about $9.1 billion in cash and short-term investments against $25.1 billion in content obligations. It has the balance sheet to be patient. Whether its shareholders do is a different question.
Source reporting: Netflix shareholder letter and SEC filings, CNBC, Variety, Deadline.