Streaming video giant Netflix (NASDAQ: NFLX) met Wall Street’s revenue expectations in Q2 CY2026, with sales up 13.4% year on year to $12.56 billion. On the other hand, next quarter’s revenue guidance of $12.86 billion was less impressive, coming in 1.2% below analysts’ estimates. Its GAAP profit of $0.80 per share was 1.5% above analysts’ consensus estimates.

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Company Overview

Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Netflix grew its sales at a solid 14.6% compounded annual growth rate. Its growth surpassed the average consumer internet company and shows its offerings resonate with customers, a great starting point for our analysis.

This quarter, Netflix’s year-on-year revenue growth was 13.4%, and its $12.56 billion of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 11.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 12.6% over the next 12 months, a slight deceleration versus the last three years. We still think its growth trajectory is satisfactory given its scale and suggests the market is baking in success for its products and services.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Netflix has shown terrific cash profitability, driven by its cost-effective customer acquisition strategy that enables it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the consumer internet sector, averaging 21.8% over the last two years.

Taking a step back, we can see that Netflix’s margin expanded by 9.8 percentage points over the last few years. This is encouraging because it gives the company more optionality.

Netflix’s free cash flow clocked in at $1.53 billion in Q2, equivalent to a 12.1% margin. The company’s cash profitability regressed as it was 8.3 percentage points lower than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

Key Takeaways from Netflix’s Q2 Results

While revenue was in line, the company's revenue guidance for next quarter slightly missed and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 9.6% to $67.87 immediately after reporting.

Netflix underperformed this quarter, but does that create an opportunity to invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).