Netflix stock hits a 52-week low after earnings—but analysts say investors are missing the bigger picture

Good morning. Netflix’s stock fell again after the streaming giant reported second-quarter earnings on Thursday, extending a selloff that has erased roughly a third of its value since April. While investors remain concerned about slowing engagement and a softer-than-expected outlook, analysts say the market may be overlooking the company’s long-term growth story.

For Q2, Netflix reported revenue of $12.56 billion, up 13% year over year but just shy of the consensus analyst estimate of $12.58 billion. It posted an operating margin of 33.4%, down from 34.1% in the year-earlier period.

The company forecasts Q3 revenue of $12.86 billion, slightly below Wall Street expectations of roughly $13 billion. It also updated its full-year revenue forecast to $51 billion to $51.4 billion and reiterated its 31.5% operating margin target. Netflix also said it would reduce the frequency of its viewing-hours transparency reports.

Shares closed on Thursday at $74.35—up 1% for the day but down roughly 44% from their June 2025 all-time high—before falling another 8% to 9% in after-hours trading following the release of the earnings report.
 
Despite the selloff, Netflix repurchased about $4.7 billion of stock during the quarter—its largest quarterly buyback on record.

For Eric Clark, portfolio manager of the LOGO ETF and CIO at Accuvest Global Advisors, that’s a sign management sees long-term value in the business.

“There’s still $27 billion left on the authorization,” Clark told CFO Daily in an email. “That’s the biggest quarterly buyback in history, so I’m happy to see they took advantage of the weakness. That’s what I was hoping and expecting them to do, and it sends a positive signal to me.”

Clark said quarter-to-quarter volatility doesn’t change Netflix’s longer-term investment case. After being largely left out of the AI-driven rally, he said, the company now looks increasingly attractive because of its steady cash generation, improving margins and shareholder returns.

“I think it’s more important to focus on what happens when we get into the fall and engagement starts to rise again,” Clark said. “We know they’re comfortable with ad revenue continuing to grow, and it’s a high-margin business with strong free cash flow generation and margins that are still gradually improving.”

On the earnings call, CFO Spencer Adam Neumann said Netflix isn’t managing the business on a quarter-to-quarter basis. “Our goal is to sustain healthy revenue and profit growth,” he said.

Neumann said Netflix still has significant room to grow, noting the company has penetrated less than 45% of its roughly 800 million addressable households worldwide and accounts for only about 5% of global TV viewing. He said those figures point to a large untapped market despite the company’s scale.

Netflix co-CEO Ted Sarandos also pointed to potential cost benefits from AI, Fortune reported. The American Experiment, a five-episode documentary, included 17 minutes of AI-enhanced footage that was produced “twice as fast and at half the cost,” Sarandos said. Netflix expects to spend up to $20 billion on content this year.

In a July 13 note, Wedbush SVP of Equity Research Alicia Reese reiterated an outperform rating, arguing that higher ad loads, improved targeting from Netflix’s in-house advertising platform, and live sports could roughly double ad revenue to about $3 billion in 2026 while supporting the company’s margin targets. She also said new publisher short-form deals launching Aug. 3 could help narrow Netflix’s engagement gap with YouTube.

Reese also highlighted subscriber retention. “Netflix’s churn rate remains among the lowest in the industry, so subscribers aren’t leaving over any single show’s decline,” she wrote.

Instead, she said, viewers are increasingly spreading their attention across YouTube, social media, free ad-supported streaming channels and podcasts rather than abandoning Netflix altogether.

“I always ask people what’s going to make them cancel their Netflix subscription,” Clark said. “Everyone still wants Netflix to do better, and I’d love to see them deliver higher-quality content.”

Have a good weekend.

Sheryl Estrada
Sheryl.Estrada@fortune.com

This story was originally featured on Fortune.com