Netflix stock slips despite the streamer beating Wall Street expectations

Netflix is playing a different game in 2025, going well beyond just subscriber growth and viral shows. Its second-quarter earnings report, released Thursday, shows how the streaming giant is leveraging global content, ad momentum, a focus on monetization breadth, and global hits to deliver impressive growth and a record-breaking quarter — but that wasn’t enough to lift the stock.

The streaming giant reported $11.08 billion in revenue, up 16% year-over-year and beating Wall Street analysts' expectations of $11.06 billion; its earnings per share came in at $7.19, exceeding the anticipated $7.08. Net income rose approximately 45% year-over-year to about $3.1 billion, while operating margin expanded to a record 34% from 27% a year earlier.

The company also raised its 2025 revenue forecast to $44.8-$45.2 billion, reflecting strong subscriber growth and advertising momentum. “The majority of the increase in our revenue forecast reflects the recent depreciation of the U.S. dollar vs. most other currencies, with the balance attributable to continued business momentum driven by solid member growth and ad sales,” the company said in a release.

Still, despite the strong quarterly performance, the company’s stock fell slightly (around 1.2%) following the bell, after trending upward throughout the day. The shares’ slip was a bit of a reality check for the streamer: Its stock has soared over 40% year to date as the company continues to extend its dominance in the streaming sector despite increased competition. But markets appear to be demanding more than beat-and-raise.

One reason for the stock’s fall could be because the company warned in the release that “operating margin in the second half of 2025 will be lower than the first half due to higher content amortization and sales and marketing costs associated with our larger second half slate.” The next two quarters will include programming such as the second season of “Wednesday,” “Happy Gilmore 2,” and Guillermo del Toro’s “Frankenstein.” Still, the company anticipates year-over-year growth in operating margins for both quarters and said it’s “optimistic heading into the second half of the year” because of a “standout slate.”

“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, [there’s] really nothing significant to note in the metrics and the indicators that we get directly through the business.”

Netflix’s ad business remains a standout; the company expects revenue from the sector to double to about $3 billion in 2025. Its ad-supported tier, one of the cheapest on the market at $7.99 a month, continues to draw subscribers — and a recent TD Cowen survey found that many subscribers would even pay more for it. On the earnings call, analysts said the ad sales show “nice momentum.”

Independent research provider CFRA said, “We think the company’s ad tech platform will enable NFLX to capture more sponsor advertising over longer contracts, while its ‘local for local’ content strategy continues to deliver results globally. With no tariff risks, attractive margins, and new growth drivers (including live programming), NFLX deserves a premium valuation, in our view.”

In May, Netflix said its ad-supported tier boasts over 94 million global monthly active users, more than doubling from 40 million just the year before. In regions where that tier is available, over 40% of subscribers are choosing the cheaper, ad-supported option — showing that viewers are happy to trade a few commercials for a lower monthly bill. Jefferies (JEF) analysts estimate that Netflix’s advertising business could hit $10 billion in annual revenue by the end of the decade.

Content remains the lifeblood of Netflix’s strategy, and the second quarter’s performance backs that up. With standout titles such as season three of both “Squid Game” (which racked up 122 million views) and “Ginny & Georgia” (53 million); “Sirens” (56 million); Argentine series “The Eternaut” (29 million), and the breakout hit animated movie “K-Pop Demon Hunters” (80 million), Netflix’s diverse slate continues to drive engagement. The company’s local-for-local strategy is paying off, with more than one-third of all Netflix viewing coming from non-English language series and films.

Even as the second half of 2025 looks content-heavy, Netflix is hoping to maintain momentum with flagship content such as the final season of “Stranger Things” and live sports. With a Christmas Day NFL game streaming debut on the horizon, Netflix is diving deeper into the sports market, leaning into marquee events (including women’s boxing matches) that draw in casual viewers, reinforcing the company’s position as a cultural powerhouse.

“Not all view hours are equal, and what we’ve seen with live is that it has an outsized positive impact around conversation, around acquisition, and we suspect, around retention,” said co-CEO Ted Sarandos. Between January and June, the number of hours people spent watching Netflix’s content grew 1% year over year.

“Standout content still drives massive engagement, but the real winners aren't just capturing attention, they’re using their brand and their scale to monetize it,” said Scott Purdy, a strategy lead at KPMG U.S. “AI may become the new competitive advantage to drive customization, engagement, and efficiency, while ad-supported models are hitting their stride with both viewers and advertisers as subscriber counts enter the rear view.”

The streamer stopped reporting an updated subscriber in the first quarter of the year. Netflix ended 2024 with a reported 301.6 million paid subscribers globally — with some analysts suggesting that the company stopped providing the figure because its subscriber base growth is slowing.

This article has been updated.