Netflix Beats Margin Forecast as Revenue Growth Slows
Operating margin reached 33.4%, topping Netflix’s forecast by 0.8 percentage point.
Netflix (NFLX), the streaming-entertainment company, reported slower second-quarter revenue growth as higher operating income and expense timing lifted profitability above its forecast. Revenue rose 13.4% year over year, down from 16.2% growth in the first quarter and a recent peak of 17.6% in the fourth quarter of 2024.
The results extended a deceleration across most regions even as engagement improved. First-half viewing hours rose 2% to more than 97 billion, compared with 1.5% growth for full-year 2024. Netflix will begin publishing its What We Watched report annually, with the next edition due in the first quarter of 2027.
Revenue reached $12.56 billion, essentially matching the company’s $12.574 billion forecast and rising 2.5% sequentially. Diluted earnings were $0.80 a share, up 11% from $0.72 a year earlier but below the first quarter’s $1.23, which included a $2.8 billion Warner Bros. termination fee.
Operating income increased 11% to $4.2 billion and rose 6% from the first quarter. Its growth trailed revenue as content amortization was weighted toward the first half, while expense timing helped operating income exceed Netflix’s $4.105 billion forecast. The operating margin rose from 32.3% in the first quarter but remained below 34.1% a year earlier.
UCAN revenue increased sequentially to $5.43 billion, though its year-over-year growth slowed to 10% as the latest price increase provided only a partial-quarter benefit. EMEA topped $4 billion in quarterly revenue for the first time, while reported growth eased to 14%. Latin America was the only region to accelerate, with revenue rising 21% to $1.58 billion.
Netflix narrowed its 2026 revenue forecast to $51.0 billion to $51.4 billion, leaving the midpoint unchanged, and reiterated its 31.5% operating-margin target. For the third quarter, it expects $12.86 billion of revenue, an 11.7% increase that would mark another slowdown, and a 33.2% operating margin. Its advertising-revenue outlook remains approximately $3 billion for the year, roughly double the 2025 total.
Free cash flow fell to $1.53 billion from $2.27 billion a year earlier, partly because of higher cash taxes tied to the termination fee, though full-year guidance remains approximately $12.5 billion. Netflix repurchased a record $4.7 billion of shares during the quarter, and a new $25 billion authorization left $27.1 billion available for additional buybacks.