Netflix Q3 forecast misses estimates as streaming giant cuts viewership data reports; stock drops 9% after hours

Earnings and outlook

Netflix reported second-quarter revenue of $12.56 billion, a 13% increase from a year earlier, and net income of $3.4 billion, or 80 cents per diluted share. The results were roughly in line with analyst forecasts of $12.58 billion in revenue and 79 cents EPS, according to LSEG. For the third quarter, the company projected revenue of $12.86 billion and EPS of 82 cents, both below the $13 billion and 84 cents that Wall Street had expected. Full-year revenue guidance was narrowed to a range of $51 billion to $51.4 billion, with ad revenue still expected to double to $3 billion. The quarter reflected recent U.S. price increases, the second in just over a year, and a $25 billion stock buyback authorized in April.

Viewership reporting scaled back

Alongside the earnings, Netflix released its latest "What We Watched" report covering the first half of 2026, which showed 97 billion hours of viewing, up 2% from the same period in 2025. The company then announced it would stop publishing the report twice a year, shifting to an annual release starting in the first quarter of 2027. In its shareholder letter, Netflix said the change was intended "to keep the focus on our primary financial metrics -- revenue and operating profit." The company will continue to publish weekly top 10 lists and title-by-title data in more than 90 countries.

Stock under pressure

Netflix shares fell as much as 9% in after-hours trading following the report, adding to a 21% decline so far in 2026. The stock had closed at $74.35, an 18-month low, before the earnings release. Investor anxiety has been building over slowing growth and competition from YouTube, TikTok, and traditional media companies. The company's failed $83 billion bid for Warner Bros. Discovery's studios, abandoned in February, also weighed on sentiment; Netflix received a $2.8 billion breakup fee after Paramount outmaneuvered it. Paramount's own acquisition of Warner Bros. Discovery has recently hit regulatory and creative community opposition, raising questions about whether Netflix might re-enter the M&A arena. Some analysts have drawn parallels to the 2022 subscriber loss that prompted the ad business launch.

Content and engagement

Netflix highlighted the crime drama "I Will Find You" and animated film "Swapped" as second-quarter hits, along with the second season of "Beef" and the docuseries "Michael Jackson: The Verdict." The Duffer Brothers' series "The Boroughs" performed well but was swiftly canceled. On the children's side, shows from Danny Go! and Salish and Jordan Matter regularly appeared on the global top 10. The company said engagement remained "healthy," with viewing hours growth accelerating to 2% from 1.5% a year ago, despite competition from the Winter Olympics and World Cup. Live events like the MLB Home Run Derby, which Netflix broadcast on July 14, are being used to attract new subscribers, even if they generate fewer viewing hours.

Strategic bets: AI, ads, and short-form

Netflix is leaning on artificial intelligence to improve personalization and voice search, and it used generative AI in postproduction on more than 300 titles, primarily for crowd enhancement and establishing shots. The advertising business is on track to double revenue to $3 billion by year-end, supported by an expanded NFL slate. The company also struck deals with YouTube creators like Alan Chikin Chow and the Stokes Twins, and with magazine publishers Condé Nast and Hearst, to produce short-form content and video podcasts aimed at daytime mobile viewing. A push into vertical video is also underway.

As we've developed an increasingly sophisticated understanding of how consumers ascribe value to our service, we know not all hours are equal. Time spent is just one aspect of strong engagement - quality and variety also matter.