Netflix stock drops despite beating earnings expectations.

Netflix's Q1 earnings exceeded expectations, with revenue and profit above forecasts. However, the stock dropped 5.1% to $1,209.24. Despite this, the company raised its revenue and operating margin forecasts for the year.

Netflix (NASDAQ: NFLX) reported its second-quarter 2025 earnings, surpassing Wall Street expectations with a 16-17.3% year-over-year revenue increase. The streaming giant's revenue reached $11.08 billion, up from $9.52 billion in the same period last year, exceeding analyst estimates of $11.07 billion [1].

Earnings per share (EPS) came in at $7.19, above the $7.08 estimate and up from $4.88 in Q2 2024. Net income rose to $3.1 billion from $2.1 billion a year ago. The company also updated its full-year revenue forecast to a range of $44.8 billion to $45.2 billion, an increase from the previous $43.5 billion to $44.5 billion [1].

Despite the strong financial performance, Netflix shares dropped about 5.1% to $1,209.24 in after-hours trading. The stock decline was attributed to investors' disappointment with the revenue forecast being driven by a weaker dollar rather than stronger customer demand [2].

Netflix attributed its revenue growth to more members, increased subscription pricing, and expanding advertising income. The company reported 94 million monthly active users for its ad-supported plan as of May, up from 70 million in November. Ad revenue is projected to reach $3 billion in 2025 [1].

Looking ahead, Netflix forecasts Q3 2025 revenue of $11.53 billion and EPS of $6.87. The company warned of a lower operating margin in the second half of 2025 due to increased content amortization and marketing expenses. However, the company raised its full-year free cash flow guidance to $8–8.5 billion, up from a previous estimate of $8 billion [1].

Netflix's market value has nearly doubled in the last 12 months, pushing it above $540 billion, more than the combined worth of Disney, Comcast, and Warner Bros. Discovery [2]. Despite the stock's recent drop, at least 16 analysts raised their price targets on the stock following the earnings report, bringing the median target to $1,365 [2].

References:
[1] https://finance.yahoo.com/news/netflix-reports-16-revenue-increase-072545976.html
[2] https://m.economictimes.com/news/international/us/netflix-share-price-market-value-netflix-stocks-crash-despite-squid-game-success-experts-point-out-reasons/articleshow/122772621.cms