Netflix’s growth engine is changing. Earnings will show if it still works

Wall Street has been binge-watching Netflix’s stock this year, but now investors want to know if the story has legs. The streaming giant will report second-quarter earnings Thursday after the bell, and expectations are high.

Analysts are projecting revenue of $11.1 billion (up roughly 16% from last year) and earnings per share of $7.07 (a 45% jump), powered by price hikes, advertising momentum, and continued global expansion. That would mark Netflix’s third straight quarter of accelerating growth — and would reaffirm its pricing power at a moment when most consumer platforms are cutting back.

But the stock is priced like a must-watch blockbuster — and investors are demanding a sequel to the first quarter’s massive numbers. Netflix shares are already up 42% this year (compared with 8% for the Nasdaq and 7% for the S&P 500) and trade at nearly 44 times forward earnings. The streaming giant’s market capitalization ($532 billion) is more than double its valuation at the start of 2024. 

With the bar this high, even a slight miss — or a murky guide — could spook investors. Options markets are pricing in a post-earnings swing of around 6%, implying more than $30 billion in market value could move on the results alone.

And yet, Netflix has two key advantages heading into this quarter: operating leverage and monetization breadth. Analysts widely view this as both a margin and a top-line story — and for good reason. Netflix’s operating margin is expected to hit 33% in the second quarter, a standout in a quarter where S&P 500 profit margins are expected to compress.

Bank of America’s Jessica Reif Ehrlich remains bullish with a $1,490 price target — a roughly 19% premium — calling Netflix “unmatched in streaming scale” and highlighting live content and advertising as key growth drivers. Wedbush’s Alicia Reese, maintaining a $1,400 target, says recent price hikes and expanding ad revenue will power 2025, with ad‑tier gains driving growth in 2026. Jefferies remains on board, too, citing strong ad monetization potential and a robust second-half content slate. 

That said, Seaport’s David Joyce downgraded Netflix to “Neutral” earlier this month, warning in a client note that “plenty of the long-term opportunity set is factored into the shares at this price, and the company needs time to execute against the expectations in advertising, aggregating (content), launching experiences, and expanding share again.” Citi, too, recently trimmed its outlook to “Neutral” with a $1,250 target, emphasizing concerns about valuation and a spotlight on ad tech metrics. Daniel Morgan, senior portfolio manager at Synovus Trust Co., told Bloomberg, “Netflix shares are priced for perfection, there isn’t a lot of room for error. … Everybody is expecting the second half to be really strong.”

Beyond bingeing

The Netflix of 2025 is different from the Netflix of only a couple of years ago. Over the last 18 months, the company has leaned into a strategy that spans advertising, live events, licensing, family content, and even sports. At the center of that strategy is its ad-supported tier, which has been expanding steadily in key international markets. Analysts estimate Netflix’s advertising revenue could exceed $4 billion this year, up from about $2.1 billion in 2024. The company has kept ad load low — four to five minutes per hour — while expanding its advertiser base, particularly in international markets where growth is strongest.

Wedbush analysts said in a recent note, “While massive subscriber growth was the primary driver in 2024, we expect price increases to drive revenue growth in 2025, and the ad tier to drive revenue higher in 2026.”

That global scale is becoming a bigger part of the story. Analysts say price hikes in Latin America and Europe, the Middle East, and Africa (EMEA) have gone smoothly, while the Canal+ bundle in France — which gives mobile subscribers Netflix access — may provide a blueprint for regional partnerships.

Alongside advertising, Netflix is continuing to flex its pricing power. The company raised monthly subscription prices in several countries earlier this year, part of a broader effort to lift average revenue per user. Variety reported, based on a recent TD Cowen survey, that 54% of Netflix subscribers said they would be comfortable with a price increase of $1 or more per month, up from 49% in a similar survey a year ago. This suggests a rising tolerance among users for modest price hikes, even as the streaming landscape becomes more crowded. 

Can content keep up?

Engagement remains a key question, especially heading into the third quarter. June Nielsen data showed streaming beat both broadcast and cable for the first time — and Netflix was responsible for 42% of that monthly streaming growth. But a lighter quarterly content slate could put pressure on engagement metrics in the second half. Some analysts are watching to see whether tentpoles series or live events can meaningfully move the needle.

Netflix still dominated the content conversation in the second quarter thanks to the final season of “Squid Game,” and Gen Z–friendly shows such as “Ginny & Georgia” and “The Summer I Turned Pretty” have continued to deliver strong engagement and helped Netflix shore up a younger demographic as it prepares for a content transition heading into 2026. At the core of that transition is “Stranger Things,” Netflix’s most valuable franchise, which is set to return for its fifth and final season later this year.

But one of the company’s most strategic moves in the second quarter may have had nothing to do with teens and everything to do with toddlers. Netflix struck a high-profile licensing deal with Ms. Rachel, the preschool educator whose YouTube sing-along videos have become appointment viewing for millions of families. Under the agreement, Ms. Rachel’s existing videos will be licensed nonexclusively to Netflix (initially four “curated compilation” episodes, with additional releases planned), giving the platform a powerful offering in the under‑6 market.

Netflix also continued its expansion into live sports, aired high-profile boxing events in the second quarter, including a match between Katie Taylor and Amanda Serrano, and the streamer is preparing for a much bigger splash later this year when it will air two NFL games on Christmas Day. The company has been clear that it isn’t trying to replicate ESPN but that it wants to target marquee events that bring in casual viewers and reinforce the platform’s cultural relevance without requiring round-the-clock rights deals. 

Behind the scenes, Netflix is also investing in gaming and AI-driven production tools. It now has more than 100 games in development, and executives have hinted at plans to integrate gaming more directly into its core app. On the production side, insiders say Netflix is using generative AI for localization, animation, and even parts of creative development, with an eye toward improving speed-to-market and reducing global production costs.

Despite all the momentum, Netflix’s valuation is demanding. In Thursday’s earnings and the call following — with co-CEOs Ted Sarandos and Greg Peters, chief financial officer Spence Neumann, and vice president of finance/IR and corporate development Spencer Wang — the company will need to deliver both a strong quarter and a compelling forward story. Analysts will be looking for signs that the ad tier can keep scaling profitably, that further price increases won’t trigger churn, and that the new pillars of growth — live events, gaming, family IP — could meaningfully contribute to the bottom line over the next 12 to 18 months. 

The password-sharing crackdown gave Netflix a huge 2024. This quarter is about proving that what comes next isn’t just a one-season arc.