Netflix shares fall despite beating Q2 expectations and raising targets

Netflix shares fell 5% after Q2 results beat expectations, with revenue up 16% to $11.08bn and EPS of $7.19. The company raised its revenue target for FY22 to $44.8-$45.2bn and raised its operating margin target to 29.5%. Analysts remain positive on the stock, citing strong underlying trends and a supportive competitive environment.

Netflix (NFLX) reported a 16% increase in revenue for the second quarter (Q2) of 2025, exceeding market expectations. The streaming giant's revenue reached $11.08 billion, which was above the $11.07 billion forecast by analysts [2]. This growth is attributed to a combination of robust member growth, a weakening US dollar, and rising ad revenue.

The company's earnings per share (EPS) of $7.19 also exceeded analysts' expectations of $7.08. Net income for the quarter was $3.1 billion, a significant increase from the $2.1 billion reported in the same period last year. Netflix's operating margin improved to 34.1% in Q2, up from 26.4% in the previous quarter and 27.1% in the year-earlier period [2].

Netflix has raised its full-year revenue forecast to between $44.8 billion and $45.2 billion, up from the previous range of $43.5 billion to $44.5 billion. The company expects a 29.5% operating margin for the year. Wall Street analysts have a positive outlook, with an average price target of $1,303.19 and a potential upside of 7.77% [3]. However, GuruFocus estimates a potential downside of 38.55% from the current price [4].

Despite the strong financial performance, Netflix's stock slipped 1% in after-hours trading following the announcement. The company's shares have soared 43% this year, but the high expectations set by investors may have contributed to the stock's decline [1].

Netflix's ad-supported tier has gained traction, with 94 million global monthly active users as of May 2025, up from 70 million in November 2024. The company expects ad revenue to roughly double to about $3 billion in 2025 [3].

The company's upcoming content slate, including the second season of "Wednesday" and the finale of "Stranger Things," could further support subscriber growth and engagement. Netflix continues to lead with the lowest subscriber churn among major streamers, indicating high user stickiness [3].

References:
[1] https://www.kron4.com/news/technology-ai/netflix-q2-revenue-growth-advertisers/
[2] https://www.sharecafe.com.au/2025/07/18/netflix-beats-earnings-expectations-as-q2-revenue-climbs-16/
[3] https://finance.yahoo.com/news/netflix-earnings-top-estimates-but-stock-slips-on-elevated-expectations-133606430.html
[4] https://finance.yahoo.com/news/netflix-earnings-top-estimates-as-company-raises-full-year-revenue-forecast-200845871.html