TLDR
- Netflix stock has dropped over 20% year-to-date, closing at $73.83
- Q2 revenue expected to rise 13.6% to $12.59 billion — its slowest growth in over four quarters
- Ad business expected to generate $705.8 million, below earlier forecasts
- Viewer retention is a growing concern, with hit shows losing half their audience after season one
- Bank of America maintains a Buy rating with a $125 price target despite the pullback
Netflix heads into Thursday’s Q2 earnings report carrying a lot of baggage. The stock is down more than 20% in 2026, and investors want answers.
At $73.83 at Monday’s close, the stock has shed a fifth of its value this year. That’s not a small number for a company that not long ago looked untouchable.
Analysts polled by LSEG expect Q2 revenue of $12.59 billion, a 13.6% year-over-year increase. That sounds decent, but it would be the slowest growth rate in more than four quarters. Adjusted EPS is expected to come in at 79 cents.
The ad-supported tier was supposed to be the next big thing. It’s not delivering — yet. The ad business is forecast to bring in $705.8 million this quarter.
Emarketer analyst Ross Benes put it plainly: “We had to lower our forecast.” The ad business hasn’t grown as strongly as most analysts originally expected.
Part of the problem is engagement. Bloomberg reported earlier this month that Netflix viewers are less likely to return for later seasons. Hit shows like “The Night Agent” and “Beef” lost roughly half or more of their audience after season one. That’s a retention issue that advertisers and investors are watching closely.
Bank of America analyst Jessica Reif Ehrlich broke down the selloff into three overlapping concerns: weakening engagement trends, potential AI disruption to content creation, and heightened competition following recent media M&A activity.
BofA noted Netflix’s own data shows total viewing hours per subscriber have been declining year-over-year. The bank reiterated a Buy rating and kept its $125 price target, but acknowledged the concerns aren’t nothing.
Competitive Pressure Mounting
YouTube and short-form video are eating into Netflix’s time. Add in traditional media players ramping up their streaming arms, and the competitive picture is messier than it was two years ago.
Morgan Stanley recently trimmed its price target to $90 from $115, while keeping an Overweight rating. The concern: an earlier-than-usual price hike during a seasonally soft period, combined with a lighter content slate, may have driven more churn than expected.
Netflix has responded by leaning into live events and exploring new deals. CNBC reported the company is looking at bidding for 2030 and 2034 FIFA World Cup U.S. broadcast rights. It’s also reportedly in talks to acquire Letterboxd, the online film platform.
From Disruptor to Defending the Lead
BofA drew comparisons to 2022 and late 2023, when Netflix faced similar skepticism over subscriber growth before recovering through paid sharing crackdowns and the ad-supported tier launch.
PP Foresight analyst Paolo Pescatore framed it well: “The company has moved from disruption to dominance, and the challenge now is to sustain momentum from a much larger base.”
Morgan Stanley’s current price target sits at $90. Bank of America’s is $125. Netflix reports Q2 results Thursday.
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