Netflix stock falls as company narrows guidance, says it will give fewer engagement updates

Netflix reported second-quarter revenue and earnings that were in line with analyst estimates on Thursday as Wall Street is keeping a close eye on the company's advertising and engagement metrics. 

Netflix stock fell more than 8% in after-hours trading on Thursday.

The streaming giant called engagement with its content "healthy," saying live events were a top draw for members, who watched more than 97 billion hours of total content in the first half of this year. The engagement metric has come into focus after reports that viewership for Netflix series drops following the first season.

On Thursday, however, the company said it would cut back on the frequency of its "What We Watched" reports, which provide a picture of engagement. Following the release of Thursday's report – which gives information on viewership for the first half of 2026 – Netflix will shift to publishing the report annually in the first quarter beginning in 2027. 

The company said its goal in separating out when "What We Watched" is published from its earnings results is to keep the focus on financial metrics like revenue and operating profit.

Questions about engagement were top of mind for analysts during Thursday's earnings call.

"I'll start by saying there is not a linear relationship between viewing hours and revenue and profit, because all hours are not created equal," said co-CEO Greg Peters during the call.

Co-CEO Ted Sarandos also said Thursday that there isn't "any material change" in second season viewership of series versus the first season, following an earlier report that said there was a drop-off. "Our season two fall off has actually slightly improved this year relative to last year, so no changes in release strategies," Sarandos said on the call.

Here's how Netflix performed for the period ended June 30 compared with estimates from analysts polled by LSEG:

Netflix reported $12.56 billion in revenue, up 13% year over year and just slightly missing analyst expectations. The rise was attributed to membership growth, pricing and increased ad revenue. 

Earlier this year, Netflix raised its subscription prices across all its streaming plans. The company said Thursday the results of those price hikes were consistent with prior changes and expectations. 

Net income for the second quarter was $3.40 billion, or 80 cents per share, compared with $3.13 billion, or 72 cents a share in the same period last year. 

Netflix expects third-quarter revenue to grow 12% and called its 2026 outlook consistent with earlier forecasts. The company said it was narrowing its 2026 forecast revenue range to $51 billion to $51.4 billion for the full fiscal year, from earlier guidance of between $50.7 billion to $51.7 billion.

Advertising remains key to the business and Netflix's investors as it has been a revenue driver across media as streaming subscriber growth has slowed. 

On Thursday, the company said it still expects to roughly double its ad revenue year over year to $3 billion. 

Netflix added that it is in "advanced stages" of discussions with advertisers in the U.S. as part of its Upfront negotiations, with the expectation that commitments will close in the coming weeks. Live sports, such as the Women's World Cup, more NFL games, MLB events and WWE, have attracted solid demand for the company. 

In general, Netflix called out live events as some of its top programming this year, with live events accounting for six of the top 10 new member sign-up days over the past five years. 

Still, Netflix noted that while live programming accounts for more than 5% of its content spending, it makes up about 1% of viewing hours. 

Netflix noted that it only got into live programming in 2023, following years of growth solely on original content and licensed TV series and movies. Since then, the company has been bulking up on sports rights. 

In Thursday's shareholder letter, Netflix noted that the "entertainment industry remains dynamic and competitive." 

Late last year, Netflix made a play for Warner Bros. Discovery's film and streaming business before ultimately walking away from the deal. The proposed deal set off a flurry of speculation about if Netflix is now interested in buying other assets.

Netflix said Thursday its approach hasn't changed as it will "prioritize reinvestment in the business, both organically and through selective M&A, while maintaining a health balance sheet and ample liquidity." Prior to its bid for WBD's assets, Netflix had long called itself a builder, not a buyer.