Netflix 2Q preview: Focusing on user engagement and content quality, advertising business and price increases are the twin engines of growth (J.P. Morgan)
In its 2Q performance preview for Netflix (NFLX), J.P.
In its 2Q performance preview for Netflix (NFLX), J.P. The report pointed out that despite fluctuations in the year-on-year growth rate of DAU (daily active users), new paying users are expected to maintain a healthy growth of 8%. The core logic is that its advertising business scale and pricing power are increasing, with revenue expected to reach US$51.17 billion in 2026 and operating profit margin of 31.7%. The market is concerned about user losses and merger and acquisition risks caused by price increases, but J.P. Morgan believes that participation indicators are not a complete representation of business trends, and more attention should be paid to revenue growth and profit acceleration (expected to be 30%+ in the second half of the year). One-sentence conclusion: Netflix's growth story has shifted from simply pursuing user growth to a new stage of profit-driven and advertising monetization. Strong content barriers and pricing capabilities will ensure its continued leading position. Positive/Constraint: Positive for Netflix (NFLX.US). The market's overreaction to short-term data (such as DAU) creates deployment opportunities, while its long-term profitability and cash flow generation capabilities (FCF estimated at $12.7 billion) may be underestimated. Catalysts: 1) 2Q26 financial report released in July, focusing on the net increase of paid users, advertising business revenue and 3Q guidance; 2) user engagement data after the launch of new content in the third quarter; 3) long-term pricing of advertising business and advertiser feedback.