Netflix’s stock fell more than 8% in after-hours trading on the 16th (local time) even after the company posted second-quarter results that matched market expectations. The drop came as its outlook for the next quarter fell short of Wall Street’s hopes.
The world’s largest online video service, Netflix, saw its stock drop more than 8% in a single day.
On the 16th (local time), Netflix said second-quarter revenue rose 13.4% year over year to $12.56 billion, or about 18.6 trillion won. Earnings per share came in at 80 cents. EPS is a measure of how much profit a company has earned divided by the number of shares outstanding, indicating how much profit belongs to each shareholder. Both figures were broadly in line with market expectations.
In the second quarter, hit titles such as the crime drama “I Will Find You” and the animated film “Swapped” helped support results. In a letter to shareholders, the company said, “Financial performance is solid and we are on track to achieve our full-year goals.”
The issue was the outlook. Netflix projected third-quarter revenue of $12.86 billion and EPS of 82 cents. Market expectations compiled by financial data provider LSEG were $13 billion and 84 cents, respectively. It also lowered the top end of its full-year revenue guidance, revising the range from $50.7 billion to $51.7 billion down to $51.0 billion to $51.4 billion.
By region, the U.S. and Canada generated the most revenue at $5.43 billion. Europe, the Middle East and Africa followed with $4 billion, Latin America with $1.6 billion, and Asia-Pacific with $1.5 billion. The figures suggest that the center of growth is shifting beyond saturated North America.
The stock, which closed up 0.91% in regular trading, plunged in after-hours trading to around $68 after the earnings release. After-hours trading is the market session that continues after the regular session ends, and it reflects investors’ immediate reaction to earnings announcements.
◆ A market reacting more to guidance than results, signaling a move into maturity
The stock market prices future profits, not past results. The higher the growth expectations already built into a stock like Netflix, the more sharply it can swing if guidance misses even slightly. That is why analysts say this selloff was driven not by weak earnings but by the gap between results and expectations.
Paolo Pescatore, an analyst at market research firm PP Foresight, said, “The third-quarter outlook reflects not so much a sudden deterioration in the business as a naturally maturing growth trend combined with management’s cautious stance.” He said Netflix remains strong but has entered a more stable growth phase with less room for mistakes.
Investor skepticism is nothing new. Netflix shares are down about 20% so far this year amid questions about the sustainability of its growth. Over the past year, the decline has exceeded 40%.
Analysts say the company has been hit by concerns surrounding its attempted acquisition of Warner Bros. Discovery as well as worries over weaker earnings. The view is that Netflix is being revalued at a crossroads as it transitions from a growth stock to a more stable one.
◆ Instead of subscribers, Netflix is experimenting with ads, live broadcasts and games to diversify revenue
As of April, Netflix had more than 325 million paid members. Even taking the global population into account, many say the room for new subscriber growth is no longer what it once was. As the era of rapid subscriber expansion that fueled the company for years comes to an end, Netflix is seeking its next growth engine in advertising, live events and gaming.
Its gaming business is also being developed, but like advertising, it is still in an early stage. Since it accounts for only a small share of total revenue, many say it is too soon for it to fill the growth gap.
The advertising business is gaining momentum. Netflix reaffirmed its goal of reaching $3 billion in advertising revenue by the end of this year, or about 4.4 trillion won. The plan is to attract advertisers through live events, including expanded broadcasts of the National Football League (NFL).
The company is also considering introducing a free-with-ads plan in some countries, but Greg Peters, co-chief executive officer, said there are no short-term launch plans.
Competition is intensifying on all sides. Netflix faces not only traditional media companies such as Disney, but also YouTube, which dominates living-room TVs, and TikTok, which controls mobile viewing time.
Netflix said total viewing time in the first half reached 97 billion hours, with growth of 2%, above the 1.5% recorded in the same period last year. Of that, one-third came from non-English-language titles, and the company said Korean content continues to perform well.
◆ Fewer disclosed metrics, growing concerns over reduced transparency
Starting next year, Netflix will reduce its viewing-time report publication from twice a year to once a year. The report has shown how much each title was watched and has served as a reference used by production companies and advertisers to gauge performance. The company said the move is intended to focus on key financial metrics such as revenue and operating profit. It follows the end of quarterly subscriber disclosures in 2025.
The market is divided. Some say that reducing public information during a period of slowing growth can be seen as an attempt to hide unfavorable numbers. There are also concerns that if investors have fewer windows into the company’s condition, uncertainty will rise and feed back into stock volatility.
Cost structure changes are also under way. Netflix said generative AI has rapidly spread across production sites and has been applied to about 300 titles. It was used mostly in post-production, such as editing and visual effects after filming. The move is seen as an effort to improve production efficiency and protect profit margins.
For the Korean content industry, there are both opportunities and tensions. With non-English titles accounting for one-third of viewing, Korean content is regarded as a key growth asset for Netflix. However, as the company emphasizes cost efficiency overall, production budgets and investment sizes may be negotiated more strictly than before.
The cutback in viewing-data disclosure is also a variable for domestic production companies. If the official channel for confirming each title’s performance shrinks, the basis producers can use in negotiations for follow-up seasons will also weaken.
Netflix’s shift in its growth formula could change the calculations of Korea’s production ecosystem as well. Whether it hits its year-end target of $3 billion in ad revenue and how successfully its live-event strategy performs are expected to be key points to watch in the next quarter.