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Netflix shares fall after guidance update following strong Q2 results
Second-quarter revenue rose 13% year over year to $12.6 billion, but investors reacted to guidance that the full year revenue range was narrowed to about $51.0 billion.
Netflix stock fell more than 8% after the company issued guidance that Wall Street viewed as slightly more conservative following its second-quarter earnings, even as underlying results remained strong. Investors focused on management's outlook rather than the quarter's growth and profit increases.
Netflix reported second-quarter revenue of $12.6 billion, up 13% year over year, and net income of $3.4 billion, up 9%. For the quarter, management projected revenue growth of about 12%, and for the full year it narrowed the outlook to approximately $51.0 billion.
Wall Street had been expecting roughly $51.38 billion for the full-year figure. In response, Netflix's chief financial officer Spencer Neumann said the quarter-to-quarter movement should be viewed as background noise, and pointed investors toward longer-term growth opportunities.
The company estimated roughly 800 million addressable households across the markets it serves, describing a $670 billion revenue opportunity. Netflix said it currently captures about 7% of that potential and around 5% of global TV viewing share, while at least 11 brokerage firms lowered their price targets after the earnings release, reflecting the updated near-term revenue outlook rather than a broader deterioration in the business.