Why Netflix Stock Dropped on Friday
Key Takeaways
Steady -- not accelerating -- growth rates make valuation more of an issue for Netflix stock.
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investment
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July 18, 2025
11:02 AM
The Motley Fool
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Interestingly, Netflix (NFLX -5
Moreover, 12%) stock dropped 4. 5% in early trading as of 9:40 a
ET, despite beating on earnings last night
Heading into the report, analysts forecast Netflix would earn $7. 06 per on just over $11 billion in revenue, in light of current trends
In fact, Netflix earned $7. 19 per on just under $11. 1 billion, thus beating on both top and bottom lines
Image source: Getty Images
Netflix Q2 earnings Sales increased 16% year over year in Q2, and Netflix dered a terrific 34% operating fit margin, up nearly seven full percentage points from a year ago
Furthermore, On the bottom line, this translated into a 47% imvement in net earnings for the ing entertainment star
Additionally, Free cash flow nearly doubled to $2 (quite telling). 3 billion -- not quite as good as the $3. 1 billion in "net income" Netflix claimed, but still impressive
Netflix cited the success of multiple ing series, including Squid Game S3, Sirens, Ginny & Georgia S3, and The Eternaut, as contributing to its results
In contrast, Perhaps more important though is that Netflix the rollout of its Netflix Ads Suite, its own prietary first-party ad platform, "across all our ads
Moreover, " Is Netflix stock a buy
Turning to guidance, Netflix said it's on course to do anywhere from $44 (this bears monitoring)
Nevertheless, In contrast, 8 billion to $45. 2 billion in revenue this year (which is more than it previously mised)
Operating fit margins could be weaker than what we saw in Q2, however -- perhaps only 30% for the year -- which would diminish the impact of the 15% to 16% revenue growth
The big question for investors now is whether mid-teens earnings growth (and relatively weak free cash flow) will be good enough to maintain Netflix's pricey 60x trailing earnings P/E ratio (which is quite significant)
The data indicates that morning, at least, investors seem to be voting with their feet: No (remarkable data).
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