Netflix Earnings Preview Q2 2026: Ad Growth or Engagement Story?

When Netflix reports its second-quarter earnings on Thursday, all eyes will be on engagement and advertising trends, along with potential latest strategic moves by the streaming giant. A key investor debate these days is whether Netflix’s narrative right now is about engagement challenges amid intense competition for audiences’ attention (see: YouTube) or possible advertising upside from growing its business.

The result of engagement worries has been pressure on the company’s shares, which even hit a 52-week low in June. Recent chatter only seems to have underlined existing concerns. After all, the earnings disclosure comes after reports that the streamer has been looking at adding live TV channels and such other subscription streamers as Peacock to its service to help boost users’ engagement.

Meanwhile, Netflix’s second-quarter content slate had all sorts of returning favorites, including Beef season 2, Temptation Island season 2, Good Girl’s Guide to Murder season 2, Four Seasons season 2, Love on the Spectrum season 4), and new series, such as Big Mistakes, the animated Stranger Things: Tales From ’85 and The Boroughs, as well as original films, such as Apex, Ladies First and Little Brother.

But beyond the Netflix stories watched on screens, what story will the streamer’s latest set of results tell, including about the impact of the FIFA soccer World Cup (which could dent engagement)? And what does the Street expect from the financial and operating update and the quarterly conversation with management, whose quotes will be closely watched and weighed by observers?

Below, The Hollywood Reporter has compiled some of the projections and questions for Netflix’s second-quarter 2026 earnings report.

Analyst: John Blackledge, TD Cowen
Stock rating and price target: buy, $112
Takeaways: Blackledge expects investors to focus on “third-quarter revenue guidance in light of softer engagement and recent price hikes; full-year 2026 operating margin guide, as Netflix in April reiterated guidance of a 31.5 percent 2026 operating margin, including M&A-related expense; and color on engagement, including a first-half engagement report, and member trends.”

But he suggested that more attention should be focused on the company’s growing ad business. “While the current investor narrative is focused on recent soft member engagement trends, we expect the burgeoning ad tier (now more than 250 million monthly active users) to help drive member growth and support margin expansion over time as the biz scales,” the expert argued. “We estimate that Netflix’s advertising biz is already accretive to overall operating margins,” and investment in it “should moderate over time,” ensuring growing margins, he concluded. “We estimate Netflix advertising segment operating margins of 40 percent in ’26, rising to about 66 percent in ’31. … Our analysis suggests that as the ad biz scales and ad op margins rise, there is potential margin upside versus our current estimates.”

For the second quarter, Blackledge expects revenue of $12.58 billion, up 13.5 percent over the year-ago period, and operating income of $4.11 billion, making for a 32.7 percent profit margin. He also projects U.S./Canada paid net member additions of 272,000, down from a 463,000 gain in the year-ago period, and global paid net member adds of 3.027 million, down from a year-ago gain of 4.171 million.

Analyst: Alicia Reese, Wedbush Securities
Stock rating and price target: outperform, $118
Takeaways: “The Ad Business Is Outrunning the Engagement Story,” Reese emphasized in the headline of her report, in which she reiterated her “outperform” ratig on the stock. “That said, elements of the bear case are real: U.S. engagement has plateaued, headline CPMs appear to be in decline, and the stock is down roughly 40 percent since Q1 results and Reed Hastings’ departure from the board. That said, the ad business is quietly doing more work than that CPM decline suggests.”

CPMs, or the cost an advertiser pays for every 1,000 views of an ad, are dropping “as supply grows, but not because advertisers are pulling back,” she highlighted. “Higher ad load, better targeting after bringing the ad stack in-house and live-sports pricing power are set to roughly double ad revenue in 2026 toward $3 billion.” New short-form content deals, going live Aug. 3, “are Netflix’s answer to the engagement gap, though eMarketer still forecasts only one added minute of daily viewing in 2027 versus three for YouTube,” Reese wrote, but concluded: “Our $118 price target eflects our view that the advertising ramp outweighs the engagement debate. We think it will.”

The analyst also touted the results of her team’s survey. “Ad-tier subscribers now show higher intent to stay with Netflix than premium subscribers do, the first time we’ve seen that crossover in our quarterly tracking, and the share of respondents on the ad tier has climbed steadily over the past year while premium’s share has declined,” Reese noted. “That’s the retention and inventory growth story showing up in subscriber behavior.”

Analyst: Laurent Yoon, Bernstein
Stock rating and price target: outperform, $100, down from $110
Takeaways: Calling the upcoming earnings update “more than a quarter,” the expert wrote: “There’s a lot riding on the second quarter as Netflix faces no shortage of near and longer-term questions – from second engagement trends and potential revisions to 2026 margin guidance to the broader challenge of sustaining growth amid evolving consumer preferences and viewing behavior.”

He predicted that the World Cup “likely further exacerbated seasonally softer second-quarter engagement, creating an incremental headwind to subscriber growth during the quarter.” And he added: “The more important question is how much of the headwind is reflected in the company’s 2026 outlook. The high end of revenue guidance could be at risk.”

Among the other questions of note is: “Can advertising offset subscriber growth pressure?” Yoon explained. “A softer subscriber trajectory could be mitigated by more than $3 billion ad revenue, providing support to both revenue and earnings per share.” All in all, he maintained his “outperform” rating on Netflix but cut his stock price target by $10 after adjusting his full-year 2026 earnings forecast “due to subscriber growth pressure (-3 million) from the World Cup 2026, while our ‘27 adjustment reflects a reacceleration in subscriber growth (+4 million), driven by the anticipated ad-tier expansion into 15 new markets.” Plus, “we also adjusted our valuation multiple down from 29 times to 26 times “to reflect [the various] challenges discussed weighing on investor sentiment in the foreseeable future.”

Analyst: Peter Supino, Wolfe Research
Stock rating and price target: outperform, $107
Takeaways: What’s priced into Netflix’s stock? That is a question that Wall Street has been asking, and Supino picked up on it. “Investors who refer to Netflix’s historical multiple range will see that today’s 19 times 2027 earnings per share [multiple] screams ‘buy!’ Amidst legitimate debates about Netflix’s ability to grow engagement per sub, competitive pressure on costs, M&A appetite, and second quarter fundamentals, we analyze the growth and quality metrics of S&P 500 stocks.”

His conclusion: “Few stocks match Netflix’s current blend of quality, growth and price. … Investors don’t need a lot to go right for Netflix to be attractive.” He highlighted that Netflix shares have dropped 22.6 percent year-to-date as of the date of publication of Supino’s note, underperforming the S&P 500 index’s 7.3 percent gain and “most of its diversified entertainment peers (-2.7 percent) due to concerns regarding Netflix’s ability to grow engagement per sub, competitive pressure on costs, M&A appetite, and organic growth.”

The analyst’s takeaway: “Netflix’s widening growth strategies, superior scale, and rich cash flow position it to extend its lead in long-form video streaming… While reaching a now-canceled deal for Warner Bros. and accelerating content spend to 10 percent growth in ’26 will cause some to question Netflix’s organic growth confidence, we think Netflix is better off pressing its scale advantage by investing more deeply in content.”

Analyst: Kutgun Maral, Evercore ISI
Stock rating and price target: outperform, $115
Takeaways: Under the headline “Streaming or Dreaming?,” the analyst highlighted the current “dislocation” in the stock, “caused by concerns about rising competition (especially from YouTube), concerns about tough second-half comparisons, concerns about market maturity and concerns about plateauing engagement.” But he is more bullish, expressing his belief that “these concerns will be addressed as Netflix continues to deliver industry-leading quality original content, aggregates more live events/sports programming, rolls out short-form content, and expands into 15 new international ad markets.”

In fact, he concluded that “these can combine to deliver stronger-than-expected 2027 results, even though the second half [of 2026] could be challenged.” For this year, “the key watch item will be margins,” Maral emphasized. “With content spend front-loaded in the first half, the 31.5 percent full-year target requires operating margin expansion in the third quarter and the fourth quarter, which is achievable in our view, but the bar steps up in the back half. Net-net, we’d expect Netflix to maintain or modestly raise its revenue and margin framework as the year progresses.”

Maral also waded into the engagement debate, pointing out that viewership hours showed “mixed” trends in the latest period, “with total hours viewed across the Top 10 titles declining 13 percent quarter-over-quarter and 9 percent over the year-ago period, decelerating from -7 percent quarter-over-quarter in the first quarter and flat year-over-year. We would note, however, that historically the correlation between Netflix’s Top 10 viewing hours and reported financial results has been relatively weak.” About reports of the possible addition of themed live TV channels and the bundling of third-party streaming subscriptions to boost engagement, the analyst offered: “The moves would echo the linear TV model Netflix originally disrupted and mirror the add-on strategies already used by Prime Video and Apple TV+, extending a multi-year push into live events, ad-supported tiers, video podcasts, and creator content.”

Analyst: Daniel Kurnos, Benchmark
Stock rating and price target: hold, no price target
Takeaways:  Kurnos’ report summarized a key debate surrounding Netflix’s stock in its headline: “Investors Continue to Disengage Ahead of Second-Quarter Print. Should They?” Mentioning that the stock “briefly touched a 52-week low in late June, even below the depths of the ill-fated [Warner Bros. Discovery] merger process, as third-party data signals suggested that engagement was already starting to see some cracks after the recent round of price hikes,” the analyst wrote: “If there were ever a year of mitigating circumstances (global war, multiple major highly watched sporting events), this one could certainly qualify, and although we should get Netflix’s engagement report, it will be backwards looking to a time when Netflix had a lot of original and event-based content.”

His conclusion: “It seems silly to say Netflix is under siege given how successful their slate appears to be this year, especially abroad, but until they can definitively address the engagement question, it feels like shares may be stuck in neutral.”

The analyst forecasts total paid memberships to grow from 341.5 million as of the end of the first quarter to 344.6 million as of the end of the second quarter, with ad tier memberships rising from 119.0 million to 126.3 million. Kurnos’ revenue estimate for the latest quarter is “mildly below reported consensus” at $12.55 billion versus the Street consensus of $12.58 billion. “While this would be a rounding error for Netflix, it feels like the company cannot afford any shortfalls at this point,” he noted, adding: “The third-quarter outlook will be much more important.”