Netflix NFLX) has long been one of Wall Street’s premier growth stories, transforming from a DVD-by-mail company into the world’s leading subscription streaming platform.
However, despite continued revenue growth, expanding profitability, and healthy free cash flow, Netflix shares have struggled to build momentum ahead of its Q2 report, which is scheduled for Thursday, July 16, after the closing bell.
The upcoming release will give investors a fresh look at subscriber-related trends, advertising growth, operating margins, and management’s outlook for the remainder of 2026. While Netflix remains fundamentally strong, expectations remain elevated, making its Q2 results particularly important.
Netflix’s Q2 Expectations
Wall Street expects Netflix to generate Q2 revenue of $12.57 billion, representing 13% year-over-year growth. On the bottom line, earnings are projected to come in at $0.79 per share, nearly a 10% increase from the prior-year period.
Beyond the headline numbers, investors will likely focus on several key themes:
- Subscriber/revenue commentary across international markets
- Advertising-tier monetization
- Operating margin expansion
- Free cash flow generation
- Management’s full-year guidance
Netflix has evolved into a highly profitable business rather than simply a subscriber-growth story. As a result, margin expansion and monetization initiatives have become increasingly important drivers of the investment thesis.
Management has also continued to invest in live programming, sports-adjacent content, gaming initiatives, and advertising capabilities as it seeks additional long-term growth avenues beyond traditional subscriptions.
Still, adding pressure to its Q2 report is that Netflix most recently missed Q1 EPS estimates and has fallen short of earnings expectations in two of its last four quarterly reports, with an average EPS surprise of -4.79%.
NFLX Has Plummeted Since Its 2025 Stock Split
Netflix completed a 10-for-1 stock split on November 17, 2025, making shares more accessible to retail investors after an extraordinary multi-year rally. While stock splits don’t change a company’s underlying fundamentals, they often coincide with strong momentum and can help broaden investor participation.
However, that hasn’t been the case so far for Netflix. Since the split, NFLX has fallen more than 30% and recently hit a 52-week low of $70 a share in late June.
With that in mind, Netflix’s upcoming Q2 report could prove pivotal. Better-than-expected earnings, stronger guidance, or encouraging commentary surrounding its advertising business and long-term growth initiatives could hopefully help NFLX get its mojo back and reignite bullish momentum.
Netflix’s Valuation is More Reasonable
Although Netflix has historically commanded one of the richest earnings multiples among large-cap media companies, NFLX is now trading at a much more reasonable forward P/E ratio of 20X.
Netflix stock has moved closer to its Zacks Broadcast Radio and Television Industry average of 13X forward earnings, and is now offering a slight discount to the benchmark S&P 500.
What may also intrigue investors is that NFLX is trading at a 42% discount to its five-year median of 35X forward earnings and is well below a high of 65X during this period.
Long-Term Fundamentals Still Look Attractive
Although short-term volatility around earnings is always possible, Netflix remains one of the highest-quality companies in the consumer discretionary sector.
Its expanding advertising platform, growing operating leverage, international opportunities, and robust content library provide multiple avenues for long-term growth. Combined with consistent free cash flow generation and a fortress-like balance sheet, Netflix remains well-positioned to compete effectively as streaming continues to evolve.
At the end of Q1, Netflix’s cash and equivalents had ballooned to over $12 billion, with the streaming giant having over $61 billion in total assets compared to around $30 billion in total liabilities.
Furthermore, while Netflix no longer reports quarterly subscribers, it highlighted ongoing paid net additions and strong momentum in its ad-supported tier during Q1.
The company stated its $8.99 ad-supported plan accounted for more than 60% of new sign-ups in markets where the option is available. That momentum continued into the second quarter, with Netflix announcing at its May 2026 Upfront presentation that the ad-supported tier now reaches more than 250 million monthly active viewers worldwide, underscoring the growing scale of its advertising business.
Having already surpassed 325 million paid subscribers globally at the end of 2025, Netflix has maintained a commanding lead over streaming competitors despite increased competition from Disney DIS), Amazon AMZN), Warner Bros. Discovery WBD), and Paramount Skydance PSKY.
This unmatched scale gives Netflix significant pricing power and provides a larger audience to monetize through its rapidly expanding advertising platform.
Bottom Line
Netflix’s Q2 report could provide the catalyst investors have been waiting for, particularly if management delivers stronger guidance, continued margin expansion, and encouraging commentary surrounding advertising and subscriber growth.
That said, Netflix stock currently lands a Zacks Rank #3 (Hold), suggesting investors may want to await management’s post-earnings outlook and additional earnings estimate revisions before initiating or adding to existing positions.
Beyond Nvidia: AI’s Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren’t likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
The Walt Disney Company (DIS) : Free Stock Analysis Report
Warner Bros. Discovery, Inc. (WBD) : Free Stock Analysis Report
Paramount Skydance Corporation (PSKY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
