Netflix shares fell around 9% in pre-market trading on Friday after the streaming giant issued weaker-than-expected guidance for the third quarter, disappointing investors despite reporting a modest earnings beat for the second quarter.
The cautious outlook renewed concerns about the company's near-term growth trajectory, even as Netflix continued to post double-digit revenue growth and improving user engagement. Netflix expects third-quarter earnings of $0.82 per share, below analysts' consensus estimate of $0.84 per share.
The company also forecast third-quarter revenue of $12.86 billion, missing Wall Street expectations of $13.0 billion. The weaker guidance weighed on investor sentiment, with analysts suggesting that the company's premium valuation leaves little room for slowing growth.
"The quarter was a win for the bears, while the price of Netflix discounts multi-year deceleration," Wolfe Research analyst Peter Supino said in a note.
Netflix also announced that it will publish its viewing-hours report only once a year, instead of twice annually, starting in January 2027.
The company said the change is intended to shift investor focus towards financial performance, particularly revenue growth and operating profit. Netflix had already stopped reporting quarterly subscriber numbers in 2025.
Q2 Results Beat Earnings Estimates
For the second quarter, Netflix reported adjusted earnings of $0.80 per share, slightly ahead of analysts' estimate of $0.79 per share. Revenue rose 13% year-on-year to $12.56 billion, although it came in marginally below the consensus forecast of $12.58 billion.
The company attributed the quarterly growth to recent subscription price increases and continued expansion of its advertising-supported subscription tier.
"Our financial performance remains solid and we're on track to meet our objectives for the year," Netflix said in its letter to shareholders.
User Engagement Continues To Improve
Despite the cautious guidance, Netflix reported stronger engagement across its platform.
Subscribers watched more than 97 billion hours of content during the first half of 2026, representing a 1.5% increase compared with the second half of 2025 and a 1.9% rise from the first half of the previous year.
The company believes its growing advertising business and pricing strategy will continue to support long-term profitability.
Analysts Remain Divided
The post-earnings decline came even as some analysts maintained a positive long-term view on the streaming giant.
Bernstein analyst Laurent Yoon said the current valuation does not fully reflect Netflix's medium- and long-term growth potential.
Eric Clark, portfolio manager of the LOGO ETF and chief investment officer at Accuvest Global Advisors, also downplayed the weaker guidance. He said investors should focus on the upcoming fall season, when engagement typically improves, adding that Netflix's advertising business continues to grow and remains a high-margin segment with strong free cash flow generation.
Clark also noted that the company's underlying business remains stable despite quarterly fluctuations.
Competition Remains Intense
Netflix continues to face stiff competition across the streaming industry from traditional media companies such as Disney as well as digital platforms including YouTube and TikTok, all of which are competing aggressively for audience attention and advertising revenue.
Investor sentiment was also affected after reports that Netflix explored acquiring Warner Bros. Discovery's studio and streaming assets but did not complete the transaction.
Netflix Stock Performance
Despite Friday's sharp decline, Netflix remains one of the world's largest streaming platforms. However, the stock has fallen more than 40% over the past 12 months as investors reassess its long-term growth outlook amid intensifying competition and slowing revenue momentum.
While the latest quarterly results demonstrated resilient earnings and healthy engagement, the weaker-than-expected third-quarter forecast overshadowed those positives, sending the stock sharply lower in pre-market trading.
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