Overseas Research and Selection Daily 0717: Goldman Sachs: TSMC increases capital expenditure to strengthen AI boom, benefiting the European semiconductor industry chain
Market JPMorgan Chase: U.S. stock market deleveraging has not yet ended and will still face volatility pressure in the coming months. JPMorgan Chase said in its latest research report that the investor deleveraging process that began in June is still continuing. There is room for further leverage reduction in leveraged stock ETFs, options and financing accounts. It is expected to become an important headwind for the stock market in the coming months. Hedge funds have taken the lead in showing signs of reducing leverage. Although the S&P 500 and Nasdaq fell in June, equity long-short funds and technology, media and telecommunications funds still rose 1.2% and 3.7% respectively for the month, mainly supported by semiconductor stocks.
JPMorgan Chase: U.S. stock market deleveraging has not yet ended and will still face volatility pressure in the coming months JPMorgan Chase said in its latest research report that the investor deleveraging process that began in June is still continuing, and there is room for further leverage reduction in leveraged stock ETFs, options and financing accounts, and is expected to become an important headwind for the stock market in the coming months. Hedge funds have taken the lead in showing signs of reducing leverage. Although the S&P 500 and Nasdaq fell in June, equity long-short funds and technology, media and telecommunications funds still rose 1.2% and 3.7% respectively for the month, mainly supported by semiconductor stocks. During the same period, semiconductor ETFs rose by 9.5%, while U.S. ultra-large-scale cloud computing companies fell by 14.5%, showing that related funds were still overweighting semiconductors. However, high-frequency data in July showed that the correlation between hedge funds and semiconductor stock trends has weakened, and their leverage indicators have also fallen from the highs set in June since 2017. The risks of leveraged ETFs have not yet been fully released. Since peaking in June, the asset size of memory chip leveraged ETFs has dropped by 34%, and that of all stock leveraged ETFs has dropped by 13%, but the ratio relative to the underlying market value is still significantly higher than the level before April. JP Morgan predicts that the market may need about three months of consolidation before the above ratio returns to normal. The ratio of memory chip leveraged ETF assets to underlying market capitalization is about three times that of the overall stock leveraged ETF, but leverage risks have spread to the broader stock market. Retail options trading is also cooling off. The number of net call options bought by small customers was close to 14 million on June 5, which was equivalent to the highs in November 2021 and October 2025, and has since fallen significantly. Historically, when this indicator drops to 2 million to 4 million, it often corresponds to the end of the adjustment of technology stocks. Meanwhile, net borrowing in the NYSE funding account remains at historically high levels, with only tentative signs of decline. JPMorgan Chase believes that short-term deleveraging will dominate the market and increase price volatility, but long-term capital supply and demand can still provide support. The bank estimates that global stock demand will be approximately US$475 billion in 2026. After deducting approximately US$200 billion in new supply, the net demand will be approximately US$275 billion, including approximately US$200 billion in the second half of the year. Retail investors may have inflows of US$1.03 trillion throughout the year, with approximately US$480 billion still flowing in in the second half of the year, but pension and insurance institutions are expected to sell approximately US$235 billion in net sales during the same period. Additionally, Bitcoin futures are sending positive signals. Despite repeated spot Bitcoin ETF capital flows, CME futures and perpetual contract positions have improved, and Strategy's U.S. dollar reserves have also increased from $2.55 billion to $3 billion, equivalent to about 20 months of dividend payments, helping to ease its concerns about selling Bitcoin in the future to raise funds. Goldman Sachs: The European Central Bank is unlikely to raise interest rates in July, and further tightening is still the mainstream expectation Goldman Sachs pointed out in its latest research report that the resumption of military conflicts in the Middle East and the renewed rise in energy prices have led ECB officials to generally believe that inflation risks are still upward. However, an immediate increase in interest rates in July is not the current policy option, and policymakers are more likely to remain on the sidelines, waiting for energy market trends and the latest economic forecast in September. Schnabel, executive member of the European Central Bank, said the current shock cannot be simply ignored because it has produced indirect inflationary pressures and may bring about second-round effects. Bundesbank President Nagel advocated remaining cautious about rising energy prices while retaining room to take decisive action when necessary. Austrian Central Bank President Koch stressed that the European Central Bank will take necessary measures to ensure that inflation falls back to 2% in the medium term. However, no ECB official has explicitly called for a rate hike in July. Some policymakers believe that as oil and gas prices have fallen from their highs, the urgency for successive interest rate hikes has diminished. Belgian central bank governor Wensch said that if the conflict is brought under control and energy prices continue to fall, the case for further tightening of policy will weaken. European Central Bank President Christine Lagarde also said that risks are more balanced than a few weeks ago and future decisions will still depend on the data. Goldman Sachs pointed out that although the probability of action in July is low, most officials still believe that the tightening cycle is not over yet. Schnabel, Slovenia Central Bank Governor Dolenc, Estonia Central Bank Governor Kasik and Malta Central Bank Governor De Marco all hinted that at least one more interest rate increase is still necessary. Kasik said it is reasonable for the market to expect another interest rate hike to ensure inflation returns to 2%.
At the same time, policymakers have yet to see clear signs of a wage-price spiral or runaway inflation expectations. Both Koch and Bank of Finland Governor Rehn said that there is currently no significant second-round effect and long-term inflation expectations remain anchored, but the economic growth outlook remains fragile. The latest analysis by ECB staff also raised the neutral interest rate range from the previous 1.75% to 2.25% to 1.75% to 2.50%. Lagarde emphasized that this range will not directly determine recent policy; Chief Economist Lane said that after the energy shock subsides, this range will affect the final interest rate level of this round of interest rate hike cycles. Bank of America: Gold’s correction may not be over yet, the deep adjustment target may be around $3,300 The Bank of America technical strategy team warned that gold may still have a lot of room to fall during the year's correction, and the current trend is similar to the bear markets after the formation of major tops in 1980 and 2011. If 2026 is finally confirmed to be the top of the long-term cycle, gold prices may face the risk of falling to $3,315. Bank of America pointed out that the gold market has seen multiple bearish technical signals at the same time, including "death cross", high net long position, top K-line pattern, TD sequence exhaustion signal, and the relative strength index (RSI) rising to 90 at the recent high. The latter is consistent with the extreme overbought levels seen when gold peaked in 1980 and 2011. The report said that this round of correction lasted only 24 weeks, while the previous rising cycle lasted 121 weeks. Although the price of gold has fallen below the 38.2% Fibonacci retracement level of $4,149, the adjustment time is still significantly shorter than the previous increase. Spot gold has fallen by 7.5% this year, with the largest decline reaching 16.8% in the past three months. Judging from historical experience, the three bear markets experienced by gold since 1970 all gave back at least 50% of the previous gains. The 50% Fibonacci retracement level of this rally is around $3,702, which Bank of America views as a key target in a deep correction. Another model based on 174 weeks of historical data points to $3,605. However, the downward trajectory of gold prices may not be a straight line. Bank of America predicts that gold may first rebound to US$4,325 to US$4,500 in the short term, and then fall back to around US$3,702. The trend may repeat the shock and decline pattern after the top was formed in 2011. If the current correction is not a normal consolidation in the bull market, but the starting point of a long-term bear market, the second half of 2026 will become a higher-risk stage. In terms of operational strategy, Bank of America does not recommend completely avoiding gold, but advocates building positions in stages: after the price of gold falls below $4,000, a small amount can be absorbed, further increasing holdings in the range of $3,700 to $3,600, and completing major position allocations in the range of $3,450 to $3,250. Goldman Sachs: TSMC raises capital expenditure to strengthen AI boom, benefiting European semiconductor industry chain Goldman Sachs said that TSMC’s second-quarter results further verify that demand for AI-driven advanced processes remains strong and constitute a positive signal for European semiconductor equipment, advanced packaging and power chip companies. TSMC's second-quarter revenue reached the top of its guidance, with high-performance computing and AI-related businesses growing 20% quarter-on-quarter, and its revenue share rising from 61% in the first quarter to 66%. The company raised its guidance for US dollar-denominated revenue growth in 2026 from the previous "over 30%" to "just over 40%". It also raised its full-year capital expenditure forecast from US$52 billion to US$56 billion to US$60 billion to US$64 billion, and reiterated that the scale of investment in the next three years will be significantly higher than the past three years. Among them, about 70% to 80% of capital expenditures in 2026 will be invested in advanced processes, which will benefit equipment manufacturers that are highly dependent on the demand for cutting-edge logic chips. TSMC also plans to invest an additional US$100 billion in Arizona to build N2 and subsequent processes and advanced packaging production capacity to meet the needs of American customers. The research and development of the A14 process is progressing smoothly and has received strong interest from high-performance computing and smartphone customers. It plans to enter mass production in 2028.
Goldman Sachs believes that the above trends are positive for ASML and ASM International. ASML previously planned to increase low numerical aperture EUV equipment production capacity by 30% in 2027 and 2028 respectively. As the energy efficiency and bandwidth requirements of AI data centers increase, the demand for TSMC's COUPE packaging technology is expected to grow, which will also promote the application of BESI hybrid bonding equipment. In addition, TSMC will continue to expand its mature process capacity for AI-related power management chips and CMOS image sensors, providing demand verification for the power semiconductor businesses of Infineon and STMicroelectronics. However, the company also warned that rising component costs are putting pressure on consumer electronics and price-sensitive markets. Goldman Sachs gave ASML, ASM International, BESI and Infineon a "buy" rating, with target prices of 2,200 euros, 955 euros, 318 euros and 88 euros respectively; it maintained a "neutral" rating on STMicroelectronics, with a target price of 58 euros. Goldman Sachs: AI data centers will generate demand for behind-the-meter energy storage, and deployment in the United States will increase to 172GWh in 2030 Goldman Sachs pointed out in its latest research report that the accelerated construction of artificial intelligence data centers and the increase in single cabinet power density are promoting behind-the-meter battery energy storage systems (BTM BESS) to become an important solution to solve power supply bottlenecks. The energy storage system has the advantages of fast deployment, millisecond-level response, backup power supply and improved power quality. It can serve as a transitional power supply before the completion of grid expansion and cooperate with on-site power generation for a long time. The scale of traditional data centers has expanded from 5 to 10 megawatts to 100 to 200 megawatts, and some AI parks have reached the gigawatt level. The power density of cabinets has also increased from 5 to 10 kilowatts to more than 50 to 100 kilowatts. GPU loads can rise from zero to full power in milliseconds. Gas turbines are suitable for stable base loads, but are difficult to adjust frequently. Energy storage projects can usually be deployed within 12 to 18 months after contracting, bypassing the wait for grid connection that may last 4 to 8 years. Goldman Sachs raised its forecast for the compound annual growth rate of U.S. electricity demand from 2.6% to 3.2%, of which demand on the grid side will grow by 2.8% and behind-the-meter power supply will contribute the remaining 0.5 percentage points, equivalent to approximately 20 GW of new capacity by 2030, which is approximately 14 GW based on a 70% capacity factor. The bank estimates that U.S. data center behind-the-table energy storage demand will be about 60 GWh in 2030, pushing U.S. energy storage deployment up from the previous forecast of 112 GWh to 172 GWh, of which approximately 161 GWh are utility-scale projects. Goldman Sachs also raised its forecast for energy storage deployment in Europe, the Middle East and Africa in 2030 from 83 GWh to 142 GWh, and more than doubled Australia's forecast for 2026 to 2028 due to policy support. Global energy storage installed capacity is expected to grow by 30% in 2027, reaching approximately 2,100 GWh by 2040. Goldman Sachs: AI demand visibility extends to 2030, TSMC expands production to consolidate foundry leadership Goldman Sachs said in its latest research report that TSMC’s second-quarter results further verified that the demand for AI continues to increase. The company has raised its full-year revenue and capital expenditure guidance, and accelerated the expansion of advanced processes and advanced packaging. Its industry leading position will not be significantly shaken in the next few years. TSMC raised its guidance for US dollar-denominated revenue growth in 2026 from "more than 30%" to "just over 40%", which is higher than Goldman Sachs' previous forecast of 39%; its full-year capital expenditure was raised from the high end of the range of US$52 billion to US$56 billion to US$60 billion to US$64 billion. Management said that customers have continued to release strong demand signals extending from 2029 to 2030. The development trajectory of AI is stronger than previously expected. Smart AI will also drive demand for various types of CPUs such as x86, ARM and RISC-V. Second-quarter revenue was US$40.2 billion, a 12% month-on-month increase and a year-on-year increase of 34%, which was at the upper edge of guidance; gross profit margin was 67.7%, higher than the company's guidance, but lower than Goldman Sachs's forecast of 68.5%; operating profit margin was 60.3%, and earnings per share was NT$27.25, about 12% higher than Goldman Sachs' forecast. The revenue guidance for the third quarter is US$44.6 billion to US$45.8 billion, with a median growth of 12% quarter-on-quarter; the gross profit margin is expected to be 65% to 67%. Although N2 mass production will drag down the gross profit margin in the second half of the year by 300 to 400 basis points, the actual decline may be smaller than expected.
TSMC plans to invest an additional US$100 billion in Arizona, bringing the cumulative local committed investment to approximately US$265 billion, and will add four additional wafer fabs based on customer demand. Goldman Sachs estimates that the company's capital expenditures from 2026 to 2028 will be US$64 billion, US$78 billion, and US$82 billion respectively. N2 will be rapidly ramped up in the second half of 2026, and A14 is planned to be mass produced in 2028. Goldman Sachs believes that the rising costs of equipment and overseas factory construction will support TSMC's gradual price increases. Price increases are expected to be low to mid-single digits in 2027, and gross profit margins will reach 66.9%, 67.0% and 67.5% respectively from 2026 to 2028. The demand for mature processes continues to diverge, the supply of AI-related power management chips and sensors is tight, and the demand for consumer electronics is still weak. Goldman Sachs raised TSMC's earnings per share forecast from 2026 to 2028 by 6.0%, 3.4%, and 3.2% respectively, maintaining a "buy" rating, and raised the target price of Taiwan stocks from NT$3,000 to NT$3,100, and the ADR target price from US$600 to US$620. Goldman Sachs: Netflix’s Q2 results are basically in line with expectations, and interaction and capital allocation still suppress market sentiment Goldman Sachs predicts that the market may react negatively after Netflix’s second-quarter earnings report is released. Although revenue was basically in line with expectations and operating profit was slightly better than expected, investors' attention is still focused on two major issues: user interaction and capital allocation. Netflix's second-quarter revenue increased 13% year-on-year to US$12.56 billion, an increase of 12% at constant exchange rates, slightly lower than Goldman Sachs' forecast of US$12.58 billion. In terms of regions, revenue in the United States and Canada increased by 10% to US$5.43 billion, Europe, the Middle East and Africa increased by 14% to US$4.03 billion, Latin America increased by 21% to US$1.58 billion, and Asia-Pacific increased by 16% to US$1.51 billion. GAAP operating profit for the quarter was US$4.19 billion, higher than market expectations of US$4.12 billion; operating profit margin reached 33.4%, higher than the company's previous guidance of 32.6%; earnings per share was US$0.80, also slightly higher than expected. However, Netflix's guidance for the third quarter is weak. The company expects revenue of US$12.86 billion, a year-on-year increase of 12%, lower than market expectations of US$13.01 billion; operating profit of US$4.27 billion, lower than market expectations of US$4.38 billion; earnings per share is expected to be US$0.82, lower than market expectations of US$0.85. Netflix also narrowed its full-year revenue guidance for 2026 from US$50.7 billion to US$51.7 billion to US$51 billion to US$51.4 billion, and maintained an operating profit margin target of 31.5%. Goldman Sachs believes that the market may react negatively after Netflix’s second-quarter earnings report is released. Although revenue was basically in line with expectations and operating profit was slightly better than expected, investors' attention is still focused on two major issues: user interaction and capital allocation. (
At the same time, policymakers have yet to see clear signs of a wage-price spiral or runaway inflation expectations. Both Koch and Bank of Finland Governor Rehn said that there is currently no significant second-round effect and long-term inflation expectations remain anchored, but the economic growth outlook remains fragile. The latest analysis by ECB staff also raised the neutral interest rate range from the previous 1.75% to 2.25% to 1.75% to 2.50%. Lagarde emphasized that this range will not directly determine recent policy; Chief Economist Lane said that after the energy shock subsides, this range will affect the final interest rate level of this round of interest rate hike cycles. Bank of America: Gold’s correction may not be over yet, the deep adjustment target may be around $3,300 The Bank of America technical strategy team warned that gold may still have a lot of room to fall during the year's correction, and the current trend is similar to the bear markets after the formation of major tops in 1980 and 2011. If 2026 is finally confirmed to be the top of the long-term cycle, gold prices may face the risk of falling to $3,315. Bank of America pointed out that the gold market has seen multiple bearish technical signals at the same time, including "death cross", high net long position, top K-line pattern, TD sequence exhaustion signal, and the relative strength index (RSI) rising to 90 at the recent high. The latter is consistent with the extreme overbought levels seen when gold peaked in 1980 and 2011. The report said that this round of correction lasted only 24 weeks, while the previous rising cycle lasted 121 weeks. Although the price of gold has fallen below the 38.2% Fibonacci retracement level of $4,149, the adjustment time is still significantly shorter than the previous increase. Spot gold has fallen by 7.5% this year, with the largest decline reaching 16.8% in the past three months. Judging from historical experience, the three bear markets experienced by gold since 1970 all gave back at least 50% of the previous gains. The 50% Fibonacci retracement level of this rally is around $3,702, which Bank of America views as a key target in a deep correction. Another model based on 174 weeks of historical data points to $3,605. However, the downward trajectory of gold prices may not be a straight line. Bank of America predicts that gold may first rebound to US$4,325 to US$4,500 in the short term, and then fall back to around US$3,702. The trend may repeat the shock and decline pattern after the top was formed in 2011. If the current correction is not a normal consolidation in the bull market, but the starting point of a long-term bear market, the second half of 2026 will become a higher-risk stage. In terms of operational strategy, Bank of America does not recommend completely avoiding gold, but advocates building positions in stages: after the price of gold falls below $4,000, a small amount can be absorbed, further increasing holdings in the range of $3,700 to $3,600, and completing major position allocations in the range of $3,450 to $3,250. Goldman Sachs: TSMC raises capital expenditure to strengthen AI boom, benefiting European semiconductor industry chain Goldman Sachs said that TSMC’s second-quarter results further verify that demand for AI-driven advanced processes remains strong and constitute a positive signal for European semiconductor equipment, advanced packaging and power chip companies. TSMC's second-quarter revenue reached the top of its guidance, with high-performance computing and AI-related businesses growing 20% quarter-on-quarter, and its revenue share rising from 61% in the first quarter to 66%. The company raised its guidance for US dollar-denominated revenue growth in 2026 from the previous "over 30%" to "just over 40%". It also raised its full-year capital expenditure forecast from US$52 billion to US$56 billion to US$60 billion to US$64 billion, and reiterated that the scale of investment in the next three years will be significantly higher than the past three years. Among them, about 70% to 80% of capital expenditures in 2026 will be invested in advanced processes, which will benefit equipment manufacturers that are highly dependent on the demand for cutting-edge logic chips. TSMC also plans to invest an additional US$100 billion in Arizona to build N2 and subsequent processes and advanced packaging production capacity to meet the needs of American customers. The research and development of the A14 process is progressing smoothly and has received strong interest from high-performance computing and smartphone customers. It plans to enter mass production in 2028.
Goldman Sachs believes that the above trends are positive for ASML and ASM International. ASML previously planned to increase low numerical aperture EUV equipment production capacity by 30% in 2027 and 2028 respectively. As the energy efficiency and bandwidth requirements of AI data centers increase, the demand for TSMC's COUPE packaging technology is expected to grow, which will also promote the application of BESI hybrid bonding equipment. In addition, TSMC will continue to expand its mature process capacity for AI-related power management chips and CMOS image sensors, providing demand verification for the power semiconductor businesses of Infineon and STMicroelectronics. However, the company also warned that rising component costs are putting pressure on consumer electronics and price-sensitive markets. Goldman Sachs gave ASML, ASM International, BESI and Infineon a "buy" rating, with target prices of 2,200 euros, 955 euros, 318 euros and 88 euros respectively; it maintained a "neutral" rating on STMicroelectronics, with a target price of 58 euros. Goldman Sachs: AI data centers will generate demand for behind-the-meter energy storage, and deployment in the United States will increase to 172GWh in 2030 Goldman Sachs pointed out in its latest research report that the accelerated construction of artificial intelligence data centers and the increase in single cabinet power density are promoting behind-the-meter battery energy storage systems (BTM BESS) to become an important solution to solve power supply bottlenecks. The energy storage system has the advantages of fast deployment, millisecond-level response, backup power supply and improved power quality. It can serve as a transitional power supply before the completion of grid expansion and cooperate with on-site power generation for a long time. The scale of traditional data centers has expanded from 5 to 10 megawatts to 100 to 200 megawatts, and some AI parks have reached the gigawatt level. The power density of cabinets has also increased from 5 to 10 kilowatts to more than 50 to 100 kilowatts. GPU loads can rise from zero to full power in milliseconds. Gas turbines are suitable for stable base loads, but are difficult to adjust frequently. Energy storage projects can usually be deployed within 12 to 18 months after contracting, bypassing the wait for grid connection that may last 4 to 8 years. Goldman Sachs raised its forecast for the compound annual growth rate of U.S. electricity demand from 2.6% to 3.2%, of which demand on the grid side will grow by 2.8% and behind-the-meter power supply will contribute the remaining 0.5 percentage points, equivalent to approximately 20 GW of new capacity by 2030, which is approximately 14 GW based on a 70% capacity factor. The bank estimates that U.S. data center behind-the-table energy storage demand will be about 60 GWh in 2030, pushing U.S. energy storage deployment up from the previous forecast of 112 GWh to 172 GWh, of which approximately 161 GWh are utility-scale projects. Goldman Sachs also raised its forecast for energy storage deployment in Europe, the Middle East and Africa in 2030 from 83 GWh to 142 GWh, and more than doubled Australia's forecast for 2026 to 2028 due to policy support. Global energy storage installed capacity is expected to grow by 30% in 2027, reaching approximately 2,100 GWh by 2040. Goldman Sachs: AI demand visibility extends to 2030, TSMC expands production to consolidate foundry leadership Goldman Sachs said in its latest research report that TSMC’s second-quarter results further verified that the demand for AI continues to increase. The company has raised its full-year revenue and capital expenditure guidance, and accelerated the expansion of advanced processes and advanced packaging. Its industry leading position will not be significantly shaken in the next few years. TSMC raised its guidance for US dollar-denominated revenue growth in 2026 from "more than 30%" to "just over 40%", which is higher than Goldman Sachs' previous forecast of 39%; its full-year capital expenditure was raised from the high end of the range of US$52 billion to US$56 billion to US$60 billion to US$64 billion. Management said that customers have continued to release strong demand signals extending from 2029 to 2030. The development trajectory of AI is stronger than previously expected. Smart AI will also drive demand for various types of CPUs such as x86, ARM and RISC-V. Second-quarter revenue was US$40.2 billion, a 12% month-on-month increase and a year-on-year increase of 34%, which was at the upper edge of guidance; gross profit margin was 67.7%, higher than the company's guidance, but lower than Goldman Sachs's forecast of 68.5%; operating profit margin was 60.3%, and earnings per share was NT$27.25, about 12% higher than Goldman Sachs' forecast. The revenue guidance for the third quarter is US$44.6 billion to US$45.8 billion, with a median growth of 12% quarter-on-quarter; the gross profit margin is expected to be 65% to 67%. Although N2 mass production will drag down the gross profit margin in the second half of the year by 300 to 400 basis points, the actual decline may be smaller than expected.
TSMC plans to invest an additional US$100 billion in Arizona, bringing the cumulative local committed investment to approximately US$265 billion, and will add four additional wafer fabs based on customer demand. Goldman Sachs estimates that the company's capital expenditures from 2026 to 2028 will be US$64 billion, US$78 billion, and US$82 billion respectively. N2 will be rapidly ramped up in the second half of 2026, and A14 is planned to be mass produced in 2028. Goldman Sachs believes that the rising costs of equipment and overseas factory construction will support TSMC's gradual price increases. Price increases are expected to be low to mid-single digits in 2027, and gross profit margins will reach 66.9%, 67.0% and 67.5% respectively from 2026 to 2028. The demand for mature processes continues to diverge, the supply of AI-related power management chips and sensors is tight, and the demand for consumer electronics is still weak. Goldman Sachs raised TSMC's earnings per share forecast from 2026 to 2028 by 6.0%, 3.4%, and 3.2% respectively, maintaining a "buy" rating, and raised the target price of Taiwan stocks from NT$3,000 to NT$3,100, and the ADR target price from US$600 to US$620. Goldman Sachs: Netflix’s Q2 results are basically in line with expectations, and interaction and capital allocation still suppress market sentiment Goldman Sachs predicts that the market may react negatively after Netflix’s second-quarter earnings report is released. Although revenue was basically in line with expectations and operating profit was slightly better than expected, investors' attention is still focused on two major issues: user interaction and capital allocation. Netflix's second-quarter revenue increased 13% year-on-year to US$12.56 billion, an increase of 12% at constant exchange rates, slightly lower than Goldman Sachs' forecast of US$12.58 billion. In terms of regions, revenue in the United States and Canada increased by 10% to US$5.43 billion, Europe, the Middle East and Africa increased by 14% to US$4.03 billion, Latin America increased by 21% to US$1.58 billion, and Asia-Pacific increased by 16% to US$1.51 billion. GAAP operating profit for the quarter was US$4.19 billion, higher than market expectations of US$4.12 billion; operating profit margin reached 33.4%, higher than the company's previous guidance of 32.6%; earnings per share was US$0.80, also slightly higher than expected. However, Netflix's guidance for the third quarter is weak. The company expects revenue of US$12.86 billion, a year-on-year increase of 12%, lower than market expectations of US$13.01 billion; operating profit of US$4.27 billion, lower than market expectations of US$4.38 billion; earnings per share is expected to be US$0.82, lower than market expectations of US$0.85. Netflix also narrowed its full-year revenue guidance for 2026 from US$50.7 billion to US$51.7 billion to US$51 billion to US$51.4 billion, and maintained an operating profit margin target of 31.5%. Goldman Sachs believes that the market may react negatively after Netflix’s second-quarter earnings report is released. Although revenue was basically in line with expectations and operating profit was slightly better than expected, investors' attention is still focused on two major issues: user interaction and capital allocation. (