Netflix Beats on Profit but Sells Off on Outlook

Revenue narrowly missed while profit edged past estimates, but Q3 growth guidance stepped down

This article first appeared on GuruFocus. Netflix (NASDAQ:NFLX) fell 9.24% premarket after reporting second-quarter revenue of $12.56 billion, up 13%, just shy of $12.59 billion analysts expected, while diluted EPS reached $0.80 past the $0.79 expected. Operating margin came in at 33.4% and free cash flow came in at $1.525 billion.

Netflix said engagement is healthy but at the same time it is reducing how often it reports engagement. Starting in 2027, Netflix will publish its "What We Watched" engagement report once a year rather than twice. Netflix bought back $4.7 billion of its own shares in the quarter, its largest quarterly repurchases on record, with about $27.1 billion of authorization left.

Netflix projected third-quarter revenue growth of 12%, a step down from the first half, and narrowed full-year revenue to $51.0 billion to $51.4 billion while holding its 31.5% operating margin target. The company still expects to roughly double ad revenue to $3 billion this year.