Netflix (NFLX) Raises the Stakes Ahead of Next Week’s Q2 Earnings Call

Netflix (NFLX) has delivered an impressive run this year, with shares up approximately 45% year-to-date and soaring over 88% in the past twelve months. However, with second-quarter earnings set to be released on July 17 after the market close, investor expectations are elevated—and so are the stakes.

Netflix appears to be transitioning from a pure growth story to a value-driven phase, positioning itself as a long-term compounder. While subscriber growth remains important, the focus is increasingly shifting to improved monetization through advertising, expanding margins, and more consistent free cash flow.

The stock continues to trade at a premium, meaning execution needs to remain strong to sustain investor confidence and momentum. At this point, I don’t see any structural headwinds—only broader macroeconomic factors that could influence sentiment in the upcoming quarter. As such, I maintain a Buy rating on the stock.

What Could Move the Needle for Netflix Stock After Q2?

Historically, Netflix’s most substantial post-earnings stock moves tend to occur under three key scenarios:

1. When net subscriber additions significantly exceed or fall short of expectations,
2. When forward guidance surprises the market—either positively or negatively—often resulting in overnight moves of 10–20%, and
3. When the company announces major strategic shifts, such as the launch of its ad-supported tier (which led to a 35% drop following Q1 2022 earnings) or the password-sharing crackdown (which drove an 8% gain after Q4 2022).

In general, the market has historically prioritized subscriber growth over monetization, but that’s changing. Netflix no longer publishes detailed subscriber numbers, as it attempts to shift investor focus to the quality of revenue and profit, rather than solely chasing raw subscriber growth—a natural move as the business matures.

With the mix between ad-supported and premium plans, revenue quality and churn reduction are becoming more important drivers of long-term value. Essentially, Netflix aims to position itself as a compounder now, rather than just a growth tech stock.

Given this shift, while guidance beats and big strategic pivots still matter most, I believe the market is paying closer attention to monetization metrics as well.

For example, management guided full-year 2025 operating margins to 29% last quarter, with Q2 margins expected to be 33%. While that guidance might sound conservative, it hints at possible cost pressures in the second half, primarily due to higher sales and marketing spending. If margins remain strong, Netflix expects to reach $8 billion in free cash flow by 2025, with a significant portion fueling growth initiatives and the rest returned to shareholders through buybacks.

Therefore, I see a good chance that any upside surprise in Q2 regarding operating margins or free cash flow—beating what might be cautious guidance—could be a meaningful catalyst for the stock.

Why Netflix Stock Keeps Climbing in 2025

In my view, Netflix’s solid stock performance this year is primarily driven by how well the market has received its shift toward becoming more of a compounder under new growth expectations—mainly the ads business—along with strong, credible guidance.

For example, the current 5-year revenue CAGR is projected at approximately 10.3%, which represents an upward revision from six months ago, when the market expected around 9.8% for the same period. Meanwhile, the 5-year EPS CAGR now stands at nearly 18%, compared to approximately 15.3% six months ago. To me, this clearly signals that investors see more room for margin expansion and stronger operational discipline going forward.

The last earnings call reinforced this, with management reiterating full-year revenue guidance in the $43.5–44.5 billion range. However, consensus has effectively priced Netflix to deliver near the top end of that range, which doesn’t leave much room for error.

More specifically, for Q2, Netflix needs to post EPS of $7.03 and revenue of $11.04 billion to meet or exceed expectations. Hitting those numbers would mean year-over-year growth of over 45% for EPS and around 15% for revenue.

Netflix Trades Rich While Technicals Stay Strong

Aside from fierce competition in streaming, tariffs, and other macro risks, probably the biggest concern for the NFLX bull case is its stretched valuation multiples. The streaming giant currently trades at a forward P/E of approximately 50.3x—not only well above the average for the movies and entertainment industry of 15x, but also around 18% higher than its own 5-year historical average.

Based on long-term EPS CAGR projections, Netflix’s PEG ratio is roughly 2.2—about 51% above its historical average. A more reasonable view is that if bottom-line growth stays on track, Netflix’s P/E could fall to around 29x by 2028, which would be more acceptable for a company firmly entering its maturation stage.

That said, the main risk for stocks like Netflix that trade at premium multiples is that simply delivering as expected is often not enough—the market usually requires a “beat, smash, and raise” to keep the bullish momentum alive. From a technical perspective, Netflix is showing bullish impetus. Key moving averages are aligned in a bullish formation, pullbacks are being consistently bought, and on-balance volume (OBV) supports the trend by indicating steady institutional buying, with no current signs of distribution or reversal.

However, it’s essential to monitor OBV closely. If it begins forming lower highs or starts to flatten while the stock price continues to rise, it could signal weakening buyer demand and raise the risk of a potential bull trap.

Is Netflix Stock Expected to Rise?

The consensus on Wall Street leans towards the market bulls, though there’s still some room for caution. Out of 37 analysts covering NFLX, 27 are bullish, and the remaining 10 are neutral. NFLX’s average price target stands at $1,272.42, implying no significant upside from the current price.

See more NFLX analyst ratings

Netflix Needs a Big Q2 Win

The odds look primarily in Netflix’s favor heading into its Q2 earnings, backed by strong bullish momentum this year and solid guidance supported by new growth drivers, such as ad expansion, making a beat on estimates pretty likely.

While these factors support a Buy rating for now, it’s worth noting that simply beating estimates might not be enough, since results will probably need to clear the bar by a healthy margin, which could still cause some short-term volatility. Even so, there don’t appear to be any real structural issues that would put the bullish thesis at risk for now.

It’s also likely that guidance for the year stays intact, with the market focusing heavily on operating margins and cash flow as key metrics to keep investors happy and help ease some of the stretched valuation concerns.