Netflix May Be Cheap Enough to Tempt Buyers After Earnings Drop

Key Points

• Netflix reported slightly better-than-expected earnings per share, but revenue came in just below Wall Street’s estimate.
• The company narrowed its full-year revenue forecast and guided for third-quarter growth below analyst expectations.
• Netflix will move its What We Watched report to an annual cadence, adding to investor scrutiny around engagement.

Netflix Inc. NASDAQ: NFLX has been one of the weakest large-cap media and technology stocks over the past year, with shares still sharply lower in 2026 heading into its Q2 earnings report. Investors who hoped the report would reverse that trend may have to wait. NFLX sold off after delivering a mixed report.

Netflix delivered a slight beat on adjusted earnings per share (EPS), with 80 cents per share coming in a penny above the estimate for 79 cents. But revenue of $12.56 billion came in slightly below the $12.58 billion expected. 

Revenue was up 13% on a year-over-year basis, and the company’s operating margin came in at 33%. Both numbers were in line with the company’s prior forecasts.

It’s being described as a report in which the company set a low bar and tripped over it. The bigger story may be that investors are deciding how to price the business that Netflix is today.

Netflix Faces a New Reality Beyond Its FAANG Era

Before the Magnificent Seven, there were the FAANG stocks: Meta Platforms Inc. NASDAQ: META, Apple Inc. NASDAQ: AAPL, Amazon.com Inc. NASDAQ: AMZN, Alphabet Inc. NASDAQ: GOOGL, and Netflix. These stocks were the darlings of the mobile and cloud computing buildout.

At that time, Netflix was delivering organic growth on an epic level. So much, in fact, that Netflix took away password sharing and aggressively moved away from its ad-free programming tier, and consumers paid for the privilege.

But the one thing that Netflix can’t seem to outrun is its competition. The company says that it “only” has about 5% of its total addressable market.

On the surface, that sounds like a company trying to explain why it still deserves to be part of the cool club. But it could also be a reminder that consumers have many options. Moreover, content generation continues to be a major expense that is coming at a time when the company is becoming more opaque about who is watching and for how long.

Netflix Will Only Report Engagement Numbers Once a Year

A notable takeaway from the report is that Netflix will now report engagement numbers (i.e., the What We Watched report) only in the first quarter starting in 2027. Management cited a goal of separating the publication of the report from earnings to keep the focus on its primary financial metrics of revenue and operating profit.

After becoming a streaming service in 2007, Netflix would report its engagement numbers every quarter. Since the company wasn’t profitable in its early days, engagement served as a proxy for future revenue and a breadcrumb on its path to profitability.

Today, Netflix is generating much of its revenue from its ad business. Therefore, from management’s perspective, engagement numbers don’t carry as much weight as they used to.

That’s probably accurate. But once analysts have become accustomed to getting a specific data point, the absence of that data opens the door for interpretation. That’s not fair, and it’s not the primary reason NFLX is down. At the same time, if Netflix knew it was going to deliver strong engagement numbers, it would probably pre-release that information.

The Chart Confirms the Story Wall Street Is Telling

NFLX has been in a clear downtrend since October 2025, carving lower highs and lower lows into a July bottom near $70. The 200-day moving average, now at $94 and sloping downward, has capped every rally since December, including bounces in February and April that both failed near that line. That's a classic bearish structure: price below a declining long-term average.

Heading into earnings, shares had stabilized in the low-$70s, closing at $74.35, with the MACD crossing above its signal line and above zero for the first time since March, a tentative bullish signal. The after-hours drop to roughly $69 undercuts that setup and pushes shares back toward the $70 support level, which has held twice this year. Holding that zone suggests the base is still intact; a decisive break below it on volume opens the door to the mid-$60s, territory NFLX hasn't seen since 2023.

Is NFLX Becoming So Bad It’s Good?

In an earnings season when many companies are expected to post record results, the companies that miss will be sharply punished. That’s a lot of what’s going on with NFLX. Investors are selling first and will ask questions in the coming days.

One thing they’ll be pondering is the company’s cash situation. Second-quarter free cash flow (FCF) came in at $1.5 billion, down from $2.3 billion in Q2 2025, with the decline reflecting higher cash tax payments. Netflix is still guiding for full-year FCF of approximately $12.5 billion, a target that includes the after-tax benefit of the Warner Bros. Discovery termination fee.

Netflix isn’t in trouble, and it’s not hard to make an argument that the company is still the best in breed in streaming. The forward price-to-earnings (P/E) ratio was around 20x before the post-earnings selling, and the company has a solid balance sheet. Those numbers put the opportunity in plain view.

But what is that opportunity? The Netflix consensus price target of $104.78 still implies meaningful upside from recent levels, even after the post-earnings sell-off. However, several analysts had been lowering their price targets before the earnings report. That trend is likely to continue in the days ahead.