Netflix Q2 earnings miss revenue forecast, analysts cut price targets

Netflix posted second‑quarter revenue of $12.56 billion, narrowly missing the $12.59 billion consensus, and EPS of $0.80 edged the $0.79 estimate, yet its full‑year revenue outlook was trimmed, prompting analysts to slash price targets amid growth concerns [2].

Earnings results and guidance

The quarter’s top line grew 13% year‑over‑year, driven by higher subscription fees and ad‑supported growth, but fell short of the $12.59 bn forecast from LSEG analysts [2]. Net income was $3.4 bn and operating margin guidance for Q3 was set at 33.2%, below the Street’s 34%‑35% range, reinforcing worries about margin pressure as content amortization peaks in Q2 [1]. Free cash flow slipped 33% to $1.53 bn, far under the $2.72 bn expected, a shortfall the company attributed to higher tax payments linked to the Warner Bros. Discovery termination fee [1].

Analyst reaction and valuation impact

Wolfe Research’s Peter Supino called the results a “murky mosaic” and cut his price target from $107 to $84, implying only 13% upside from the Thursday close [2]. JPMorgan’s Doug Anmuth lowered his target to $85 from $118, while Bank of America kept a $105 target, and Jessica Reif Ehrlich of BofA trimmed hers to $125, suggesting 41% upside [2]. The consensus price target now sits around $112, but prediction markets assign a 60.5% probability of a miss and price the stock near $70 post‑earnings, highlighting the split between bullish and bearish bets [1].

Advertising as a growth lever

Netflix expects ad revenue to roughly double to $3 bn by 2026, with the advertiser base up more than 70% year‑over‑year to over 4,000 clients, positioning ads as the clearest near‑term catalyst [1]. However, analysts warned that a weaker ad ramp in the second half could further limit upside, especially as the company seeks to offset decelerating subscriber growth after price hikes and the abandoned Warner Bros. deal.

What to watch

• Q3 earnings release (early August) – will revenue and margin guidance improve or confirm the slowdown.
• Ad‑revenue ramp – quarterly updates on ad sales and advertiser count, testing the $3 bn 2026 target.
• Content spend – Netflix plans a 10% increase in 2026 content budget; how this impacts free cash flow will be scrutinized.

The earnings underscore that while Netflix’s subscriber base remains robust, the market now hinges on whether advertising can deliver the promised growth and whether margin compression can be arrested, leaving the stock’s upside tightly bounded.