Netflix Q2 2025 Earnings: What Investors Need to Know

Streaming giant Netflix (NASDAQ: NFLX) released Q2 2025 results on July 17, beating expectations on both sales and earnings for the seventh consecutive quarter. Despite this, markets weren’t jumping for joy. Shares traded down around 1% after hours Thursday, giving back around half of the gain the stock achieved during the regular session, and are down nearly 5% in early trading on Friday. 

So, why didn’t these results move shares materially higher? Additionally, what can investors take away from the results regarding the longer-term outlook on the consumer discretionary stock?

Netflix’s Q2: Currencies Drive Outperformance, But Not Stock Price Gains

Netflix’s revenue in Q2 came in at just under $11.1 billion, representing a 16% increase from the same period a year ago. This was just barely better than analysts expected. Adjusted earnings per share (EPS) of $7.19 equated to a growth rate of 47%, eclipsing analyst forecasts of 45% growth.

The company previously raised its full-year revenue guidance to a midpoint level of $45 billion, up from $44 billion.

Despite the beats, shares fell. The company attributed most of its revenue and EPS outperformance, as well as its guidance increase, to favorable foreign exchange impacts. This comes as the U.S. dollar has been weakening against most other currencies.

However, because Netflix can’t control foreign exchange movements, markets are not going to reward the stock for beating expectations based on this.

Still, the company provided other information that was positive. Member growth exceeded forecasts but came near the end of the quarter. That meant that the full effect didn’t show up in Netflix’s revenue figures. Note that Netflix no longer reports subscriber numbers. Operating margins increased, and churn remained in line with expectations.

Hours watched through the first half of 2025 also ticked up 1% from the first half of 2024. The company suggests that this figure could improve further as the year progresses. Many of its standout releases, including the Stranger Things finale, will premiere in the year's second half. 

Overall, Netflix's quarter was “not much to see here.” However, that doesn’t mean important information that provides insight into its longer-term growth path wasn't available.

New UI and Ads Suite Rollout Are Good Signs for Netflix’s Ambitions

Netflix has several key levers it can pull to continue growing toward its ambitious $1 trillion market cap target. Likely the biggest is growing ad revenues. Netflix made multiple strides during the quarter that can benefit this part of the business. First, the company introduced its redesigned user interface (UI), with 50% of users engaged with it.

The new platform provides real-time recommendations, changing what it thinks users may want to see based on various factors. This can help increase engagement by making people more likely to find content they want. Increased engagement would increase the value of advertising on Netflix, driving higher revenues.

Additionally, the company has fully completed the rollout of its Netflix Ads Suite. This is the firm’s in-house ad technology platform. Although this likely didn’t bring much upside last quarter, it sets the company up to accelerate its ad sales growth going forward. The Ads Suite makes it easier for marketers to purchase ads and optimize ad performance.

Thus, the foundation through which the company’s ads business can flourish is now laid. As more advertisers get their hands on the platform, competition for ad space on Netflix increases. This can allow the company to get paid more by advertisers over time.

Netflix also plans to continue expanding into gaming and other “interactive experiences," which it sees as a very large addressable market. Pursuing more live events outside of the U.S. is another potential growth driver. These strategies can increase engagement and membership long-term.

Netflix’s Long-Term Outlook; Linear to Streaming Trend Remains Paramount

As of the July 17 close, Netflix trades at a forward price-to-earnings ratio of 47x. That is 42% above its average forward P/E of 33x over the last three years. This comes as the stock has gained 43% in 2025 as of the July 17 close. Netflix’s valuation is clearly elevated versus history, but it has many ways to continue growing, as detailed above.

Additionally, the company is still likely to benefit from the secular trend away from linear TV to streaming. Streaming continues to take market share away from other forms of TV watching, while still only representing 46% of total viewership. As this percentage is likely to increase, the streaming pie grows bigger, benefiting Netflix’s growth. Due to this and the company’s ability to find new monetization pathways, the stock’s long-term outlook remains promising.

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The article "Netflix Q2 2025 Earnings: What Investors Need to Know" first appeared on MarketBeat.