Transcript: Netflix Q2 2026 Earnings Conference Call

Netflix (NASDAQ: NFLX ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary Netflix reported FX-neutral revenue growth slowing from 12% in Q2 to 11% in Q3, with expected full-year top-line growth of 13% to 14%.

The company highlighted healthy subscription revenue growth driven by membership increases, pricing adjustments, and higher ad revenue. Netflix is expanding its content variety, including live programming, video podcasts, and cloud games, contributing to increased engagement and retention. Content expense growth is forecasted at 10% for 2026, with a focus on disciplined investment and positive performance in original series and live events. Management emphasized the strategic importance of partnerships, like the recent integration with TF1 in France, and the potential for a free tier offering.

The company is seeing strong early results from its cloud-first video game strategy and expects to scale up further. Netflix maintains a high bar for large-scale M&A, focusing primarily on organic growth and opportunistic investments. 7 billion of shares in Q2, reflecting its strong liquidity and commitment to returning excess cash to shareholders. Full Transcript Spencer Huang, VP of Finance and Capital Markets Good afternoon and welcome to the Netflix Q2 2026 earnings interview.

I'm Spencer Huang, VP of Finance and Capital Markets. Joining me today are Co-CEOs Ted Sarandos and Greg Peters and CFO Spence Newman. As a reminder, we will be making forward-looking statements and actual results may vary. We'll now take questions submitted by the analyst community.

We'll begin with a question on our guidance and our business outlook. And this question comes from Steve Cahall of Wells Fargo. What is the main driver of FX-neutral revenue growth slowing from 12% year over year in Q2 to 11% year over year as the guidance for the third quarter suggests? Spence, do you want to take that?

Spence Newman, CFO Yeah, sure, sure. Thanks, Steve. So look, we don't manage the business on a quarter-to-quarter basis. Our goal is to sustain healthy revenue and profit growth.

We talk about that in our letter every quarter. We're guiding, as you say, to 12% revenue growth in Q3 reported, 11% FX-neutral. The Q3 revenue drivers are very similar to Q2. It's primarily growth in our subscription revenue from increases in memberships and pricing and higher ads revenue.

We continue to see healthy acquisition and retention trends on the membership side and our recent price adjustments are going well on the pricing side. Now recall there is a little bit of quarter-to-quarter choppiness in growth because last year was more back half weighted. So that may be a little bit of what you see in the deceleration but honestly it's not what we manage to. We manage to the full year and halfway through the year we're making strong progress against our goals and we're tracking to our financial plan for 2026.

We expect to deliver another strong year with, as you see in the guide, 13% to 14% top line growth for the full year. That's roughly 12% FX-neutral or about $6 billion of incremental revenue year over year. And by the way, when we finish 2026, it's worth saying also that in many ways we're still just getting started as a company. We're entertaining an audience of a billion people with still lots of room to grow into our addressable market.

On every measure, we're under 45% penetrated into addressable households around the world. It's roughly 800 million addressable households. We're capturing, you know, we think just 7% of addressable revenue market. It's about $670 billion of addressable revenue in the countries and categories in which we operate today.

And we estimate that we're only about 5% of TV view share globally. So we're delivering on our 2026 plan and we believe we’ve got lots and lots of runway for solid growth ahead of us. Spencer Huang, VP of Finance and Capital Markets Thanks, Spence, for that thorough answer. I'll now move us along to the topic of engagement, where we do have several questions.

This first one is from Rob Sanderson of Loop Capital Markets. His question is: Management has stated that engagement quality is improving even as reported viewing hours per member have softened. Can you help investors understand what internal metrics provide confidence and how these translate into lower churn, pricing power, higher ads monetization, et cetera? At what point would slow growth in total viewing hours become a concern?

Greg Peters, Co-CEO I'll take this one and unpack it a bit since I know that there's plenty of interest on this topic. Start by saying there is not a linear relationship between view hours and revenue and profit because all hours are not created equal. All hours don't provide the same kind of value to the business. And a really great example of this is live programming.

So live events do a lot of lifting for us for acquisition. They're good for monetization, they drive ad revenue, fandom. They're also a promotional platform, but they do not yield typically as many raw view hours. So live we expect will be 5% of our content budget this year, but we think that'll only be 1% of view hours.

Having said that, you know, six out of top 10 new member signup days over the past five years have come from live events. And if you compare that to another content category, take animation series, kids, family TV. It's also about 5% of our content spend, the same amount of spend, but it's going to drive, we expect, 8% of view hours. So same spend and 8x the raw view hours.

You can see the differences there even though, as indicated by the amount that we're investing in both those categories being the same, we think they're doing the same value for the business. So we're constantly looking to improve across every dimension of engagement. We look at these as three dimensions: quality, variety, quantity. Because taken collectively they drive acquisition, they drive retention, they drive the value that our consumers and our advertising partners ascribe to our service.

We described in the last few earning calls the progress we've made on quality over the years. We're not going to go into the details of that quality metrics because, frankly, it's taken years for us to develop it, vet it, and assess it and improve it and we think that those details are a competitive advantage. We're also continuing to expand the variety of our entertainment offering. You see us launch new types of content like live, like video podcasts, cloud games, TV games.

Those are all doing different things in our portfolio to support different needs from our members. And then on quantity, view hours grew 2% in the first half of 2026. 5 billion hours relative to the same period last year. 5% growth in 2025.

And just to be very clear, like all those other dimensions, we remain focused on continuing to grow that number and better understanding how we are doing at delivering member value. Member love is critical to our business. We get it. We geek out on improving that understanding, operationalizing that understanding.

And with regard to engagement, when I started about 20 years ago, we had one number to describe engagement: hours. Just flat hours, no weighting, no adjustments. And very similar to how we've evolved other metrics in the business since then, we've gone through about a dozen major iterations of our understanding that get more and more sophisticated because we know ultimately it's combined quality, variety, and quantity of engagement that translates into satisfaction and value for members and that drives the strong business outcomes we see right now: industry-leading retention.

We see increased willingness to pay, strong advertiser demand, and those ultimately drive the top-level metrics of our business: revenue and operating profit, which are really the ultimate signs of our health. Ted Sarandos, Co-CEO Have this visual of you geeking out, Greg. It's hard to see Spencer geeking out, but I can see us geeking out. Greg Peters, Co-CEO Those are 20 years of debates and wonkiness.

Spencer Huang, VP of Finance and Capital Markets Well, let me geek out on the next question which comes from Steve Cahall of Wells Fargo. His question is: Content expense growth is accelerating in 2026. How is the slate performing and what metrics are we watching to see how this growth in content drives increased member value? How do we think about the expense acceleration converting into revenue acceleration?

Ted Sarandos, Co-CEO Let me take that, Steve. Look, I think when it comes to programming spend, there are three really important takeaways. First to remember is that the vast majority of our programming spend goes into the core TV series and film where we have a really strong track record, more than a decade of translating those investments into value for our members and returns for the business. I'm going to come back to that core in just a second.

But the second one is that we're really disciplined investors so there isn't some hyper-acceleration of content investment. We grow the content spend slower than revenue while we're continuing to invest in a huge addressable market. So we're forecasting content expense up about 10% this year. It's a little higher than the 8% we averaged over the last five years and below the 14% that we averaged over the past decade.

The third thing we want you to remember here is that when we expand into new entertainment offerings, new initiatives, we do it gradually, we do it where we believe we can add more value for our members, and we do it where we believe we have the right to win. And then we look for the positive signals before we invest at material scale. This is our MO. It's been our MO for some time.

You ask how the slate's performing; there's a lot to be happy with in Q2. I Will Find You was our biggest launch of original series this year. Swapped is on track to become the second-biggest original animated film, right behind K-Pop: Demon Hunters, which is exciting. Speaking of K-pop, we have K-dramas like Teach You a Lesson, which is on track to become the second most-watched South Korea show ever globally.

And it's on track to be our biggest series in South Korea of all time. There's a show called The Polygamist—probably not on your radar, maybe, Steve—but it's out of EMEA. It's another great example of our understanding of the local markets and the local regions. The Polygamist was a popular novel from Zimbabwe more than 10 years ago from an author named Sue Niyati, and the teams adapted that into a soapy series for South Africa, where it's now a huge hit and is traveling all over the region and all over the world.

In Latin America, we've got a big season that just came back for Rosario Tijeras. This was a show that started its life as a licensed show from TV Azteca in Mexico. After three successful seasons, we picked it up and produced an original season four, season five, and just screened that season six. So you're seeing the slate perform around the world, which is a real differentiated part of our business.

Now with that said, with the core, we're also really pleased with the investment so far in our live programming. It plays a really important role, as Greg mentioned earlier, driving acquisition, accelerating ad revenue, fueling conversation, helping us to launch new shows. It's helped us build our—and it's also helping us to understand what are the benefits of live over the entire catalog. So, you know, we're ramping up our live event slate.

You saw the Kevin Hart roast in Q2, the Major League Baseball Home Run Derby earlier this week. What was really fun at the Derby: we produced an original and exclusive Hot Ones special that we shot on a baseball field to promote Will Ferrell's new series The Hawk, which just launched today actually. And I think it's a cool example of the intersection between our core—you know, that core series, The Hawk—our expansion into new exclusive creator content with Hot Ones with Sean Evans as a best-in-class creator. We're thrilled to be in business together, plus live sports, all coming together on a baseball field and on Netflix around the world.

The result there is a highly attractive, scalable return on content investment and it ladders up to healthy business metrics that Greg just detailed and our strong growth in revenue, dollar profit, and profit margin. Spencer Huang, VP of Finance and Capital Markets Thanks, Ted. Our next question on engagement comes from David Joyce of Seaport Research Partners. The question is: Attention is being raised that your second-season viewing of series is dropping and therefore affecting engagement growth.

How would you address this? Are you going to revert to releasing one episode at a time or making longer seasons with more episodes or managing the production process so there is less time between seasons? Ted, you want to take that? Ted Sarandos, Co-CEO Yeah, thanks for asking, David.

I really appreciate the question because in aggregate we are not seeing any material change in our second season viewing compared to season ones. Our second seasons are performing well within our bands of expectation. You know, very often we see drop-off from season one to season two. It's very common in the industry and it's even more so with us because we launch our shows so big.

So you know, our global reach, our discovery mechanism, releasing all at once, this enables us to find a very large audience early. So our shows tend to start really big, while most other, you know, places, their shows start pretty small and occasionally grow from there. For example, I just mentioned the polygamists from South Africa. That show's already had 24 million views in five weeks and it's still charting.

When we look across the entire portfolio, across all the regions, all the content categories, our season two fall-off is actually slightly improved this year relative to last year. Now of course you can pick any five data points to tell any story you want. But I'm going to repeat this: our season two fall-off is actually slightly improved this year relative to last year. So no changes in release strategies.

Spencer Huang, VP of Finance and Capital Markets Thanks, Ted. The next question comes from Vikram Kesevabotla of Baird. Last quarter you shared that the World Baseball Classic was a significant driver of signups in Japan. What have you observed with respect to the retention and engagement of these members since then?

How has this influenced your perspective on the value of regional live programming? Greg Peters, Co-CEO Yeah, great. Thanks for asking. We talked about this a lot.

Last quarter, World Baseball Classic on Netflix in Japan was a huge hit. It became our most watched program ever in Japan. It was the biggest baseball streaming event ever. World Baseball Classic is kind of like these other big live events and they behave a lot like our returning seasons of our big shows.

They drive disproportionate signups and because of that acceleration they can exhibit slightly higher churn. But the results are exactly consistent with that trend and in line with our expectations and all of our modeling. So we're thrilled and we're continuing to see, you know, to lean into live events because they have a big outsized positive on the business. They drive conversation, drive net acquisition.

So we're going to continue to build out that global live event calendar and expand to include some regional live events as well. Spencer Huang, VP of Finance and Capital Markets Great. I'll now move us on to a series of questions around content strategy. We have actually two that are pretty similar, so I will do my best to combine them.

They're from Robert Fishman of MoffettNathanson and Rich Greenfield of LightShed Partners. First, from Robert Fishman: What is your openness to leverage Netflix's leading global scale to bundle with other streaming services like Peacock, or even consider a streaming channel store to compete with Amazon, YouTube, or Roku? On a related point, Rich Greenfield asks: While it's only been a few weeks, the integration of TF1 in France — is that integration driving higher engagement for Netflix, including non-TF1 content? Do you think there is a meaningful opportunity for Netflix to become a distributor or platform for third-party streaming services around the world?

Greg Peters, Co-CEO I can take this one. Since the very beginning when we launched our streaming service, we've always sought to expand the entertainment offering we've got in that service. We wanted to provide more value for our members. Our members consistently tell us that they want more from us.

We see that in sort of usage behavior. We see it in any kind of testing or modeling we do around the space. And I would say that fulfilling on that customer desire for more has really been the driver for growth for our business for the last two decades. This partnership with TF1 is yet just another approach to expanding that offering.

We're just adding to the range of capabilities that we have to do that and the mechanisms we have to do that. We built the leading streaming entertainment service by combining an unparalleled selection of high-quality programming and a best-in-class product experience. We've got a global footprint, big reach, and the ability then to deliver huge audiences, deep engagement, industry-leading monetization. So whether through licensing or through new partnerships like TF1, we believe that we can help other producers, other services, maximize the value, the relevance of the content that they invest in by finding those bigger audiences.