NEW YORK, July 17, 2026, 12:25 EDT — Shares of Netflix (NASDAQ:NFLX) traded at $68.95, down 7.3%, as of 12:09 p.m. EDT Friday, following the company's release of a third-quarter forecast that fell short of consensus estimates. The slight miss, though small in magnitude, triggered a sharp market response, underscoring investor concerns about decelerating revenue growth.
Netflix projected third-quarter revenue of $12.86 billion and diluted earnings per share (EPS) of $0.82, while analysts polled by LSEG had anticipated $13.0 billion and $0.84, respectively. This would mark a slowdown in revenue growth to 11.7% year-over-year, compared to the 13.4% growth achieved in the second quarter.
Record Buybacks Raise Questions
In the second quarter, Netflix repurchased $4.71 billion of its own shares, a record for the company and equivalent to 3.1 times its quarterly free cash flow of $1.53 billion. The aggressive buyback program reduced the weighted diluted share count by 2.0% year-over-year, to 4.261 billion shares. As a result, EPS rose 11.1% to $0.80, outpacing net income growth of 8.8%, with the lower share count contributing roughly two percentage points to EPS growth.
Despite the buyback support, the company's cash position declined. Cash, equivalents, and restricted cash fell by $3.16 billion during the quarter. Netflix still has $27.1 billion remaining under its buyback authorization, representing about 9% of its midday market value. CFO Spence Neumann defended the policy, calling Q2 "the largest quarter of share repurchase in our history." Netflix maintains its full-year free cash flow guidance of approximately $12.5 billion.
Investor Visibility Dims
Adding to investor unease, Netflix announced it will only publish its viewing report annually starting in 2027, after first-half viewing exceeded 97 billion hours and grew 2%. Ben Barringer, head of technology research at Quilter Cheviot, commented, "Whenever you take away a data point from investors … you will get punished by the market."
The stock's valuation remains elevated, trading near 20 times forward earnings, compared to Walt Disney (NYSE:DIS) at 13.5 times and Comcast (NASDAQ:CMCSA) at 6.6 times. The broader market declined less sharply, with the S&P 500 down 0.6% to 7,490.05 and the Nasdaq Composite off 1.3% to 25,558.15 as of 10:10 a.m. EDT.
Analyst Response and Risks
At least 18 analysts cut their price targets on Netflix following the report, though the median target remains about 40% above Thursday's close. Key risks include execution against the company's roughly $3 billion advertising target, pricing-related churn, and renewed weakness in viewing. On the upside, stronger content or faster ad sales could support a rebound.
Netflix kept its full-year 2026 revenue guidance unchanged at $51.0 billion to $51.4 billion, and maintained a 31.5% operating margin target. While buybacks can support per-share metrics, they cannot replace the need for faster revenue growth to sustain the stock's premium valuation.
