Netflix (NFLX) surpassed second-quarter earnings estimates and raised its full-year revenue forecast, yet shares fell more than 4% shortly after the market opened on Friday, as the results failed to exceed the high expectations investors had set.
“Despite a good quarter and positive tone that business trends remain strong, shares are up 42% year-to-date and expectations were high,” William Blair analyst Ralph Schackart wrote in a note titled “Good Quarter, but Tough to Surpass High Expectations.”
“In other words,” he added, “An overall ‘good’ set of results and guide were not good enough for elevated expectations, in our view.”
Netflix reported second-quarter revenue of $11.08 billion, a 17.3% increase year-over-year and above its prior guidance of $11.04 billion. Earnings per share (EPS) came in at $7.19, beating the forecast of $7.03 and rising from $4.88 a year earlier.
Looking ahead, Netflix provided upbeat guidance, expecting third-quarter revenue of $11.53 billion versus analyst estimates of $11.28 billion. EPS is projected at $6.87, also above the $6.70 consensus.
For full-year 2025, Netflix raised its revenue outlook to $44.8 billion–$45.2 billion, up from $43.5 billion–$44.5 billion previously. “The majority of the increase in our revenue forecast reflects the recent depreciation of the US dollar vs. most other currencies, with the balance attributable to continued business momentum driven by solid member growth and ad sales,” the company stated.
Executives highlighted growth in the ad-supported tier, which they say is driving user growth and showing “nice momentum.” Netflix expects ad revenue to roughly double to around $3 billion in 2025. The ad-supported plan, priced at $7.99 per month in the U.S., recently reached 94 million global monthly active users, up from 70 million in November.
“Similar to last quarter, we’re carefully watching consumer sentiment in the broader economy,” Netflix co-CEO Greg Peters said on the earnings call. “But at this point, really nothing significant to note in the metrics and the indicators that we get directly through the business.” Peters added that retention remains “stable and industry-leading,” with price hikes performing as expected and user engagement remaining healthy.
Netflix’s strong momentum may continue with new seasons of hits like Wednesday and Stranger Things, along with Squid Game’s recent success. The company also expects live events and sports programming to further boost engagement and ad revenue. Speculation is growing around Netflix potentially acquiring UFC rights as well.
Netflix plans to increase content and marketing spending in the second half of the year but expects year-over-year operating margin growth for both quarters and remains on track for full-year margins of 30%, one percentage point above prior guidance.
Regarding mergers and acquisitions, CFO Spencer Neumann said, “We’ve historically been more builders than buyers and we continue to see big runway for growth without fundamentally changing that playbook. We’ve been pretty clear in the past that we also have no interest in owning legacy media networks.”
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