Netflix's third-quarter revenue guidance fell short of expectations, and its stock price plummeted more than 9% before the market opened
Special topic: Focus on the second quarter financial report of US stocks in 2026 It fell more than 9% in pre-market trading. The core reason was that the company's third-quarter performance guidance was lower than market expectations. Platform user viewing activity data also failed to dispel Wall Street's concerns. The streaming media giant disclosed its second-quarter financial results: earnings per share exceeded analysts' expectations, and revenue was basically in line with market estimates. Revenue in the second quarter increased 13.4% year-on-year to US$12.56 billion, slightly lower than Bloomberg’s consensus estimate of US$12.58 billion; revenue growth fell back from 16.2% in the first quarter of this year. The company's second-quarter earnings per share were $0.80, slightly above consensus estimates of $0.79 and compared with $0.73 in the same period last year. Netflix shares are down 40% in the past 12 months. The company also admitted that competition in the entertainment industry is fierce and the market environment is changing rapidly. Management said: "We will focus on three core directions to continue to lead the industry: outputting higher-quality film and television content, comprehensively optimizing platform services based on technology, and improving commercial monetization capabilities." Third quarter full year performance guidance Netflix forecast revenue of $12.86 billion for the quarter, compared with Wall Street expectations of $13 billion; third-quarter earnings per share are expected to be $0.82, below analysts' estimates of $0.84. For the full year of 2026, Netflix expects a revenue range of US$51 billion to US$51.4 billion, which is basically the same as the previous forecast of US$50.7 billion to US$51.7 billion. North America is Netflix's largest market by revenue. In the second quarter, local revenue increased by 10% year-on-year, and the growth rate was lower than the average level of the past four quarters. Among all regions, only the Latin American market saw an increase in quarter-on-quarter growth. Geetha Ranganathan, senior media analyst at Bloomberg Intelligence, said in an interview with Yahoo Finance: "The slowdown in growth is an objective fact, and management has not clearly articulated a feasible plan to revive the business. The overall financial report does not have any bright spots that can boost market confidence." “Not all watch time is worth equal value” Watching time is the core operating indicator of streaming media platforms. Netflix disclosed that the total broadcast time on the platform exceeded 97 billion hours in the first half of 2026, setting a new high in the company’s history. The company said that even with the Winter Olympics and World Cup this year diverting user attention, the playback time in the first half of the year still increased by 2% year-on-year, compared with the growth rate of only 1.5% in the same period in 2025. When analysts asked about the slowdown in the growth of viewing time, Netflix co-CEO Greg Peters responded: "The commercial value of different playtimes is not equal," and gave an example of live sports events. Netflix announced on Thursday that it will adjust its data disclosure rules: starting from 2027, it will no longer release detailed viewing data with its quarterly financial report, but will instead release it to the outside world in the first quarter of each year. Management said the move was to allow the market to return its focus to core financial indicators. July 9, 2026, Los Angeles, California. Netflix co-CEOs Ted Sarandos, Will Ferrell, and Molly Shannon attended the Los Angeles premiere of the series "Eagle." Netflix looks for next growth catalyst Netflix plans to launch a short video content section and draw on the mature strategies of major social platforms to attract new users and increase user stay time. The platform has launched short videos produced by Buzzfeed Studio, Condé Nast, Hearst, Penske Media and other organizations since August 3. "I think Netflix offers the best value for money in entertainment in the industry," he said, citing the basic package of $8.99 per month in the United States as an example. In addition, the market is concerned about the loss of viewers in the second season of the series. Co-CEO Ted Sarandos explained on Thursday that the platform will concentrate resources on vigorously promoting the first season of the new series, so the decline in playback volume in the second season is normal. March 25, 2026, San Francisco. The scene of the offline interactive event for fans of the Major League Baseball opening game. Chief Financial Officer Spencer Neumann told analysts: Netflix covers less than 45% of potential paying households, and its global TV viewing share is only 5%, so there is ample room for long-term growth.
The company's negative financial signals: operating net cash flow and free cash flow both declined year-on-year, with free cash flow falling to US$1.5 billion from US$2.3 billion last year. The main reason for the shrinkage in cash flow is the large cash tax expense, which also includes the acquisition of Paramount Skydance After Discovery Pictures, the US$2.8 billion exit compensation paid to Netflix - after Netflix participated in the acquisition bid for the film studio and ultimately chose to withdraw, this compensation matter is still suppressing market sentiment. Generative AI empowers content production Netflix introduced in the announcement that generative artificial intelligence is widely used in the company’s entire creative business. In 2026, about 300 film and television works have adopted AI workflow, which is mainly used in post-production. AI tools are used for large-scale group performance shots, war scenes, world view panoramic vistas and other difficult scenes; the company admits that without generative AI, many of these shots cannot be shot on the ground. Sarandos said: "High-quality content ultimately relies on excellent creators, and artificial intelligence will not change this core logic. AI only provides creators with stronger tools to help realize creative ideas."
The company's negative financial signals: operating net cash flow and free cash flow both declined year-on-year, with free cash flow falling to US$1.5 billion from US$2.3 billion last year. The main reason for the shrinkage in cash flow is the large cash tax expense, which also includes the acquisition of Paramount Skydance After Discovery Pictures, the US$2.8 billion exit compensation paid to Netflix - after Netflix participated in the acquisition bid for the film studio and ultimately chose to withdraw, this compensation matter is still suppressing market sentiment. Generative AI empowers content production Netflix introduced in the announcement that generative artificial intelligence is widely used in the company’s entire creative business. In 2026, about 300 film and television works have adopted AI workflow, which is mainly used in post-production. AI tools are used for large-scale group performance shots, war scenes, world view panoramic vistas and other difficult scenes; the company admits that without generative AI, many of these shots cannot be shot on the ground. Sarandos said: "High-quality content ultimately relies on excellent creators, and artificial intelligence will not change this core logic. AI only provides creators with stronger tools to help realize creative ideas."