2 months ago
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Bryan White, The Motley Fool
Sun, July 26, 2026 astatine 9:50 AM CDT 4 min read
Netflix (NASDAQ: NFLX) shares fell 8% aft its second-quarter study connected July 16, yet the streaming elephantine is connected gait for its astir profitable twelvemonth ever. The institution spent astir $5 cardinal connected banal buybacks, its largest quarterly repurchase enactment connected record, and absorption reloaded its buyback authorization to $27 billion.
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All of this comes astatine a clip erstwhile investors look disinterested, adjacent arsenic shares commercialized for little than 20 times earnings. The banal is down astir 50% from past year's high, weighed down by a valuation rerating and concerns that idiosyncratic engagement is softening against rising contention from short-form video, podcasts, gaming, and different streamers.
A maturing exemplary
Management argued connected the net telephone past week that earthy viewing hours don't archer the full story, and its Q2 shareholder missive described engagement arsenic healthy. Management continues to expect gross maturation of 13% to 14% and an operating borderline of 31.5% for the afloat year. That's much than 1,000 ground points of borderline enlargement implicit the past 3 years.
The company's currency travel illustration is strengthening arsenic gross maturation outpaces contented spending growth. Free currency travel is expected to turn by much than 30% this twelvemonth to $12.5 billion, up from erstwhile guidance of $11 billion, arsenic margins proceed to expand. Given the stock's show of late, semipermanent Netflix shareholders are understandably near scratching their heads.
Management besides noted that caller terms increases successful cardinal markets, specified arsenic the U.S. and Mexico, person "gone well." The $8.99 ad-supported subscription program provides an affordable introduction point, and the institution expects advertisement gross to astir treble to $3 cardinal successful 2026. That's inactive conscionable 6% of revenue, but it carries higher incremental margins than the halfway subscription business, giving the borderline communicative much country to run.
The conflict for attraction
Concerns surrounding idiosyncratic engagement were circulating heading into the report. On the net call, absorption pushed backmost connected these concerns, arguing that engagement had improved somewhat successful the archetypal fractional of the year. Still, the company's determination to determination its elaborate engagement study from a semi-annual to an yearly merchandise raises questions, particularly aft it stopped reporting subscriber metrics past year.
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