When Netflix reports its second-quarter earnings on Thursday, all eyes will be on engagement and advertising trends, along with the latest potential strategic moves by the streaming giant. A major debate among investors these days is whether Netflix’s narrative right now is about the challenges of engagement amid intense competition for audience attention (see: YouTube) or the potential advertising aspect of growing its business.
The result of the correlation concerns was pressure on the company’s shares, which hit a 52-week low in June. Recent conversations seem to have highlighted existing concerns. After all, the earnings revelation comes after reports that the streamer was looking into adding live TV and other subscription channels like Peacock to its service to help boost user engagement.
Meanwhile, Netflix’s content slate for Q2 contained all kinds of returning favorites, including… meat season 2, Temptation Island season 2, The Good Girl’s Guide to Murder season 2, Four Seasons season 2, Love is on the spectrum Season 4), and new series, such as Big mistakesanimation Stranger Things: Tales from ’85 and Biologyin addition to original films, such as summit, Ladies first and Little brother.
But beyond the Netflix stories being watched on screens, what story will the latest set of findings from streamers tell, including the impact of the FIFA World Cup (which could impact participation)? What can the Street expect from the financial and operational update and quarterly conversation with management, the prices of which will be closely watched and weighed by observers?
less, Hollywood Reporter He’s compiled some expectations and questions for Netflix’s Q2 2026 earnings report.
analyst: John Blackledge, T.D. Quinn
Stock rating and target price: Purchase, $112
Fast food: Blackledge expects investors to focus on “third-quarter revenue guidance in light of weak engagement and recent price increases; full-year 2026 operating margin guidance, as Netflix in April reiterated 31.5 percent operating margin guidance for 2026, including M&A-related expenses; engagement color, including first-half engagement report; and member trends.”
But he suggested focusing more attention on the company’s growing advertising business. “While the current investor narrative focuses on recent soft member engagement trends, we expect a thriving advertising layer (now over 250 million monthly active users) to help drive member growth and support margin expansion over time as the business scales,” the expert said. “We estimate that Netflix’s advertising business is already accretive to gross operating margins,” he concluded, and investment in it “should moderate over time,” ensuring margins grow. “We estimate operating margins for the Netflix advertising segment at 40 percent in 2026, rising to approximately 66 percent in 1931…. Our analysis indicates that as the scale of the advertising business and advertising operating margins rise, there is potential upside versus our current estimates.”
For the second quarter, Blackledge expects revenue of $12.58 billion, up 13.5 percent compared to the same period last year, and operating income of $4.11 billion, generating a profit margin of 32.7 percent. US/Canada paid member net additions are also expected to be 272,000, down from a gain of 463,000 in the same period last year, and global paid member net additions are expected to be 3.027 million, down from last year’s gain of 4.171 million.
analyst: Alicia Reese, Wedbush Securities
Stock rating and target price: Excel, $118
Fast food: “Advertising Business Outperforms Engagement Story,” Reese asserted in the title of her report, reiterating her “outperform” rating on the stock. “However, the elements of the bear case are real: U.S. share has stabilized, CPM headlines appear to be on the decline, and the stock is down nearly 40 percent since Q1 results and Reed Hastings’ departure from the board. However, the advertising business is quietly doing more than the low CPM suggests.”
She stressed that CPM, or the cost an advertiser pays for every 1,000 ad views, declines “as exposure grows, but not because advertisers decline.” “The increased ad count and better targeting after bringing the company’s ad stack in-house and live sports pricing power could nearly double ad revenue in 2026 to $3 billion.” The new short-form content deals, which launch on August 3, “are Netflix’s answer to the engagement gap, although eMarketer still expects just one additional minute of daily viewing in 2027 versus YouTube’s three minutes,” Rees wrote, but concluded that “our $118 price target reflects our view that the advertising slope trumps the engagement debate. We think it will.”
The analyst also promoted the results of the survey conducted by her team. “Ad tier subscribers are now showing a higher intent to stay with Netflix than Premium subscribers, the first time we’ve seen this crossover in our quarterly tracking, and the share of ad tier participants has risen steadily over the past year while Premium’s share has declined,” Rees noted. “This is the story of retention and stock growth that shows up in subscriber behavior.”
analyst: Laurent Yoon, Bernstein
Stock rating and target price: Outperforms at $100, down from $110
Fast food: “There’s a lot ahead of us in Q2, as Netflix faces no shortage of near- and long-term questions — from second share trends and potential revisions to 2026 margin guidance to the broader challenge of sustaining growth amid evolving consumer preferences and viewing behavior,” the expert wrote, describing the upcoming earnings update as “more of a quarter.”
He predicted that the World Cup “will likely exacerbate weak seasonal engagement in the second quarter, creating increasing headwinds to subscriber growth during the quarter.” “The most important question is how much headwinds are reflected in the company’s 2026 outlook. The high end of revenue guidance may be at risk,” he added.
Other noteworthy questions include: “Can advertising offset the pressure of subscriber growth?” Yoon explained. “The softer subscriber path could be mitigated by advertising revenues in excess of $3 billion, providing support to both revenue and earnings per share.” Overall, it maintained an “outperform” rating on Netflix but lowered its stock price target by $10 after revising its full-year 2026 earnings forecast “due to subscriber growth pressure (-3 million) from the 2026 World Cup, while our 27 re-revision reflects accelerating subscriber growth (+4 million), driven by expected ad layer expansion into 15 new markets.” In addition, “we also adjusted our valuation multiple from 29x to 26x” for the reflection [the various] Challenges affecting investor sentiment for the foreseeable future are discussed.
analyst: Peter Supino, Wolf Research
Stock rating and target price: Excel, $107
Fast food: What is Netflix stock price? That’s the question Wall Street asked, and Supino answered. “Investors who point to Netflix’s multiple historical range will see today’s earnings per share at 19 times 2027 [multiple] Shout “Buy!” “Amid legitimate discussions about Netflix’s ability to increase engagement per subsidiary, competitive pressure on costs, appetite for mergers and acquisitions, and Q2 fundamentals, we analyze growth and quality metrics for S&P 500 stocks.”
His conclusion was: “There are few stocks that match Netflix’s current mix Of quality, growth and price. … Investors don’t need much to go right for Netflix to become attractive.” He stressed that Netflix shares were down 22.6% year-to-date through the publication of Supino’s note, an underperformance of the S&P 500’s gain of 7.3% and “most of its diversified entertainment peers (-2.7%) due to concerns about Netflix’s ability to increase engagement per subscriber, competitive pressure on costs, appetite for mergers and acquisitions, and organic growth.”
Analyst’s Conclusion: “Netflix’s expanding growth strategies, superior scale, and rich cash flows position it to extend its leadership in long-form video streaming… While the now-canceled deal for Warner Bros. and accelerating content growth to 10 percent in ’26 will cause some to question Netflix’s organic growth confidence, we believe Netflix is better positioned to press its scale advantage by investing more deeply in content.”
analyst: Kotjon Maral, Evercore ISI
Stock rating and target price: Excellence, $115
Fast food: Under the headline “Streaming or dreaming?”, the analyst highlighted the current “turmoil” in the stock, “caused by concerns about increased competition (particularly from YouTube), concerns about tough second-half comparisons, concerns about market maturity and concerns about flat engagement.” But he is more optimistic, expressing his belief that “these concerns will be addressed as Netflix continues to deliver high-quality, industry-leading original content, aggregates more live events/sports programming, rolls out short-form content, and expands into 15 new international ad markets.”
In fact, he concluded, “These could combine to deliver stronger-than-expected results for 2027, although the second half of the year will see better-than-expected results.” [of 2026] “It can be appealed.” “The main monitoring element for this year will be margins,” Maral stressed. “With content loading in the first half, the full-year target of 31.5 percent requires operating margin expansion in the third and fourth quarters, which is achievable in our view, but the bar is rising in the back half. Net-net, we expect Netflix to maintain or modestly increase its revenue and margin framework as the year progresses.
Maral also waded into the engagement debate, noting that hours watched have shown “mixed” trends recently, “with total hours watched across the top 10 titles down 13 percent QoQ and 9 percent year over year, slowing from -7 percent QoQ in Q1 and flat year over year. However, we note that the historical correlation between the Top 10 hours watched on Netflix and reported financial results has been relatively weak.” On reports of the possibility of adding themed live TV channels and bundling third-party streaming subscriptions to boost engagement, the analyst offered: “These moves will reverse the linear TV model that Netflix originally disrupted and reflect add-on strategies already used by Prime Video and Apple TV+, extending a multi-year push into live events, ad-supported tiers, audio video and creator content.”
analyst: Daniel Cornus, The Standard
Stock rating and target price: Hold, no target price
Fast food: The Cornos report summed up the main controversy surrounding Netflix stock in its headline: “Investors continue to disengage ahead of Q2 print. Should they?” Noting that the stock “briefly touched a 52-week low in late June, even below the depths of the ill-fated crisis.” [Warner Bros. Discovery] “If there is a year of extenuating circumstances (world war, several major sporting events being watched), this event could certainly qualify, and while we should get a Netflix share report, it would go back to when Netflix had a lot of original, event-based content,” the analyst wrote.
His conclusion: “It seems silly to say that Netflix is under siege given how much success its roster has had this year, especially abroad, but until they can address the engagement issue once and for all, it looks like the stock may remain stuck in neutral.”
The analyst expects total paid membership to grow from 341.5 million as of the end of the first quarter to 344.6 million as of the end of the second quarter, with ad tier membership rising from 119.0 million to 126.3 million. Cornos’ fourth-quarter revenue estimates are “slightly below reported expectations” at $12.55 billion versus the Street consensus of $12.58 billion. “Although this would be a rounding error for Netflix, it appears the company cannot afford any shortfalls at this point,” he noted, adding: “Q3 forecasts will be much more important.”
