Netflix (NASDAQ:NFLX) executives said the company remains on track for its 2026 financial plan, pointing to continued subscription growth, pricing gains, rising advertising revenue and a broadening content strategy during the company’s second-quarter earnings interview.
CFO Spence Neumann said Netflix is guiding for 12% reported revenue growth in the third quarter and 11% growth on a foreign-exchange-neutral basis. He said the drivers are “very similar to Q2,” led primarily by subscription revenue growth from membership gains and pricing, along with higher advertising revenue.
For the full year, Neumann said Netflix expects 13% to 14% top-line growth, or roughly 12% on an FX-neutral basis, representing about $6 billion of incremental revenue year over year. He also emphasized that management is focused on the full year rather than quarter-to-quarter fluctuations.
Neumann said Netflix believes it still has significant room to grow, estimating the company is less than 45% penetrated into about 800 million addressable households globally, has captured about 7% of an addressable revenue market of approximately $670 billion, and accounts for about 5% of global TV viewing share.
Engagement Metrics Remain a Focus
Co-CEO Greg Peters addressed investor questions about viewing hours and engagement, saying there is not a direct linear relationship between raw viewing hours and revenue or profit. He cited live programming as an example, noting that live content is expected to account for about 5% of Netflix’s content budget this year but only about 1% of view hours. However, Peters said six of Netflix’s top 10 new member sign-up days over the past five years have come from live events.
By contrast, Peters said kids and family animation series are also expected to represent about 5% of content spending but about 8% of view hours. He said Netflix evaluates engagement across quality, variety and quantity, rather than relying only on total hours viewed.
On the quantity side, Peters said viewing hours grew 2% in the first half of 2026, an incremental 1.5 billion hours compared with the same period last year. He said that was a slight acceleration from 1.5% growth in 2025.
“It’s combined quality, variety, and quantity of engagement that translates into satisfaction and value for members,” Peters said, adding that Netflix continues to see “industry-leading retention,” increased willingness to pay and strong advertiser demand.
Content Spending and Slate Performance
Co-CEO Ted Sarandos said most of Netflix’s programming spending continues to go toward core TV series and films, where he said the company has a long track record of generating member value and business returns. Sarandos said Netflix is forecasting content expense to rise about 10% this year, above the 8% average over the last five years but below the 14% average over the past decade.
Sarandos pointed to several second-quarter releases as evidence of the slate’s performance, including “I Will Find You,” which he said was Netflix’s biggest original series launch this year, and “Swapped,” which he said is on track to become the company’s second-biggest original animated film behind “K-Pop: Demon Hunters.”
He also highlighted regional programming, including the South Korean show “Teach You a Lesson,” which he said is on track to become the second-most-watched South Korean show globally on Netflix and the company’s biggest series in South Korea. Sarandos also cited “The Polygamist,” adapted from a Zimbabwean novel for South Africa, and “Rosario Tijeras” in Latin America.
Asked about concerns over second-season viewership declines, Sarandos said Netflix is not seeing a material change in aggregate second-season viewing compared with first seasons. He said second seasons are performing within expectations and that second-season falloff has “slightly improved” this year compared with last year. He also said there are no changes to Netflix’s release strategy.
Live Events, Partnerships and New Formats
Sarandos said live programming is playing an important role in driving acquisition, accelerating advertising revenue and generating conversation. He cited the World Baseball Classic in Japan, which he said became Netflix’s most-watched program ever in Japan and the biggest baseball streaming event ever.
While Sarandos said such live events can show slightly higher churn because they drive disproportionate sign-ups, he said results were in line with expectations and Netflix plans to continue expanding its global live event calendar, including regional live events.
Peters also discussed Netflix’s partnership with TF1 in France, saying the integration is still early at four weeks but that the company is pleased with the performance so far. He said the arrangement adds local French programming for members while maintaining a distinct product experience for TF1’s brand.
Asked about a potential free ad-supported streaming television, or FAST, offering, Peters said a free option could make sense in some markets, but Netflix must be thoughtful about cannibalization of paid tiers and would need an effective scaled advertising business in the relevant country. He said Netflix has no near-term plans to launch such an offering.
Sarandos said Netflix is encouraged by early progress in vertical clips and video podcasts, saying podcasts are driving incremental viewing, particularly during daytime hours and on mobile. He cited partnerships with publishers including Condé Nast, Hearst and People, as well as programming involving creators and brands such as Martha Stewart, “The Breakfast Club,” the official “Bridgerton” podcast, Bill Simmons, Pete Davidson and Brian Williams.
Advertising, Pricing and Games
Peters said Netflix manages its advertising business for total revenue growth and sees an opportunity to narrow the gap between average revenue per membership on the ad tier and the standard ad-free tier. He said Netflix has expanded demand sources, continued building its own ad technology stack, added products and measurement tools, and made it easier for advertisers to transact with the company.
On pricing, Peters said recent increases in markets including the U.S., Mexico and Spain have gone well and are consistent with prior price changes and expectations. He said Netflix evaluates whether it has delivered sufficient member value before raising prices.
Peters also discussed Netflix’s video game strategy, saying the gaming market represents about $150 billion in consumer spending excluding China and Russia and not including advertising revenue. He said cloud-based TV games are showing positive signs, with FIFA and Unhinged becoming Netflix’s two most successful cloud game debuts. Since scaling the cloud initiative last October, Peters said monthly active players for cloud games have increased 11 times.
AI, M&A and Capital Allocation
Sarandos said generative AI is beginning to affect hundreds of Netflix productions, with workflows used in roughly 300 titles, especially in post-production. He said the tools are helping with complex shots and sequences, including crowd enhancements and historical battle scenes, while allowing some work to be completed faster and more efficiently.
Sarandos cited the documentary series “The American Experiment,” which he said includes 17 minutes of AI-enhanced footage produced twice as fast and at half the cost of prior options. He said any cost savings are likely to be reinvested into more content.
Asked about media consolidation and speculation around acquisitions, Sarandos said Netflix would not comment on market speculation and reiterated that the company is “primarily builders, not buyers.” Neumann said there is no change to Netflix’s capital allocation philosophy, which includes investing in the business, maintaining liquidity and a healthy balance sheet, and returning excess cash through share repurchases.
Neumann said Netflix repurchased $4.7 billion of shares in the second quarter, its largest quarterly repurchase in company history, and still has about $27 billion of capacity remaining under its authorizations.
About Netflix (NASDAQ:NFLX)
Netflix, Inc (NASDAQ: NFLX) is a global entertainment company that provides subscription-based streaming of films, television series, documentaries and other video content. Founded in 1997 by Reed Hastings and Marc Randolph and headquartered in Los Gatos, California, the company began as a DVD-by-mail rental service and introduced streaming video in 2007. Netflix later expanded into producing and distributing original programming, beginning notable original hits in the 2010s, and now operates a content production and distribution ecosystem alongside its licensing activity.
The company’s primary product is its on-demand streaming service, which can be accessed on a wide range of internet-connected devices and delivered through a suite of apps and web platforms.
