Netflix earnings are after the bell. Here's what to expect

Netflix is scheduled to report second-quarter earnings after market close Thursday, with investor attention focused on the impact of recent price hikes and the burgeoning advertising tier, as the company no longer provides quarterly subscriber updates. Wall Street anticipates EPS of $7.08 and revenue of $11.07 billion, signaling significant year-over-year growth. Analysts project price increases to drive 2025 revenue and the ad tier to propel 2026 revenue, potentially leading to substantial free cash flow, contributing to the stock's over 90% gain in the past year.

Analysis

Netflix is approaching its second-quarter earnings report with investor focus squarely shifted from subscriber growth to monetization effectiveness. Wall Street consensus projects significant financial acceleration, with expected earnings per share of $7.08 representing 45% year-over-year growth and revenue of $11.07 billion marking a 15% increase from the prior-year period. This follows a strong first quarter where a 13% revenue rise was primarily driven by price increases, validating the company's strategic pivot. Analyst commentary from Wedbush reinforces this outlook, outlining a multi-year growth trajectory where price hikes are expected to be the primary revenue driver in 2025, followed by a material contribution from the advertising tier in 2026. This strategy is anticipated to expand contribution margins and generate substantial free cash flow. The market has already priced in a significant degree of optimism, with the stock having rallied over 40% year-to-date and more than 90% over the last 12 months, setting a high bar for the upcoming results.

Key Decisions for Investors

• Investors should assess the upcoming earnings based on the performance of monetization strategies, such as growth in the ad-supported tier and the impact of price hikes on revenue and margins, rather than historical subscriber metrics.
• Given the stock's 90% appreciation over the last year, expectations are elevated, meaning any failure to meet revenue or earnings forecasts, or a cautious outlook, could lead to a significant price correction.
• Long-term holders should closely scrutinize management's commentary on the 2025-2026 roadmap, specifically seeking confirmation of the expected revenue contributions from pricing and advertising, which underpins the thesis for margin expansion and future free cash flow growth.