Netflix is growing, but not fast enough: the slowdown in revenue is causing concern on Wall Street
In the second quarter, turnover stood at 12.6 billion and profit rose by 9 per cent. However, forecasts that fell short of expectations caused the share price to fall
The figures add up. It is the trajectory that is not convincing. Netflix closed the second quarter with revenue up 13 per cent at $12.56 billion and net profit up 9 per cent at $3.4 billion. These figures were broadly in line with expectations, accompanied by an operating margin of 33.4 per cent. Yet, in after-hours trading following the close of Wall Street, the share price fell by more than 8 per cent.
The market has looked beyond the rear-view mirror. For the third quarter, Netflix is forecasting revenue of 12.86 billion and diluted earnings of 82 cents per share, compared with the 13 billion and 84 cents indicated by the consensus of analysts. Expected revenue growth is set to slow to 11.7 per cent, the lowest rate since 2023. After years in which the platform could rely on almost automatic subscriber growth, every decimal point below forecasts now becomes a warning sign.
Netflix insists that the business continues to run smoothly. “Our financial performance remains solid and we are on track to meet our targets for the year,” the group wrote in its letter to shareholders. For the full year 2026, the company has narrowed its revenue guidance to between $51 billion and $51.4 billion, representing growth of 13–14 per cent, whilst confirming an operating margin of 31.5 per cent.
The key, however, is to understand where the next phase of growth will come from. The paid streaming market has not yet reached its full potential, but it is maturing. And Netflix is trying to transform itself from a service offering series and films into a broader entertainment platform: live events, sport, cloud-based video games, video podcasts, content from creators and deals with traditional broadcasters.
In 2026, live programming will account for just over 5 per cent of content expenditure and generate barely 1 per cent of viewing hours. Yet it has produced six of the ten days with the highest number of new subscriptions over the last five years. It is in this disparity that the strategy becomes clear: sport and events are not just about racking up viewing figures, but about attracting new customers and advertising. The schedule includes the NFL, wrestling, baseball and the Women’s World Cup.
