Netflix Q2 revenue growth seen slowing as ad bets lag
Netflix will report its slowest quarterly revenue growth in over a year on Thursday, testing investor confidence in an advertising business that has so far failed to offset fading gains from past price hikes.
Netflix reports second-quarter results on Thursday amid mounting pressure to prove its growth strategy to Wall Street. Revenue is expected to rise 13.6 per cent to $12.59 billion, marking the slowest growth in over four quarters, according to analysts polled by LSEG. Adjusted earnings per share will likely total 79 cents.
The streaming giant has shed more than a fifth of its market value this year. This selloff reflects deepening scepticism among investors about whether the platform can maintain its historical growth rates. The company faces intense pressure from YouTube, traditional media companies, and shifting mobile viewing habits that fragment audience attention.
Central to these concerns is the advertising segment, viewed as essential now that revenue boosts from password-sharing crackdowns and price increases are fading. The unit is expected to generate $705.8 million in the quarter. "We had to lower our (advertising) forecast," said Emarketer analyst Ross Benes, adding the ad business "has not grown as strongly as most analysts originally expected."
Advertisers require consistent engagement, but Netflix is showing signs of struggle in this area. According to Bloomberg News, audiences for hit shows like "The Night Agent" and "Beef" dropped by roughly half or more between their first and second seasons. This sharp decline in returning viewers threatens the sustained viewing hours needed to justify premium advertising rates.
To combat this, Netflix is expanding into live events and acquisitions. CNBC reported the company is exploring a bid for the 2030 and 2034 FIFA World Cup U.S. rights, and is in talks to buy online film platform Letterboxd. While the recent Comcast NBCUniversal spinoff has sparked broader deal speculation, analysts anticipate Netflix will stick to smaller targets rather than a major acquisition.
The company is navigating a difficult transition from a rapid-expansion phase to a mature business model. "The company has moved from disruption to dominance, and the challenge now is to sustain momentum from a much larger base," said PP Foresight analyst Paolo Pescatore. Thursday's results will reveal whether its current strategy is capable of meeting that challenge.
