Netflix shares declined more than 4% on Friday as some investors were disappointed by a revenue forecast that was driven more by a weaker dollar than strong demand for the streamer's content.
Expectations were running high for the streaming giant, after its shares nearly doubled in value in the past year and viewers binged on content such as the final season of South Korean survival drama "Squid Game" in the second quarter.
But executives said much of the increase in the annual forecast was driven by weakness in the U.S. dollar, now predicting revenue of between $44.8 billion-$45.2 billion, up from $43.5 billion-$44.5 billion previously.
"When your shares are already binge-watched to perfection, the earnings beat needed to be stronger to satisfy expectations," said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
"Instead, some sold on the good news and maybe questioned whether the positive FX effect will be there a few quarters down the road."
A crackdown on password-sharing, more sports content and its ad-supported tier helped Netflix draw tens of millions of new viewers in 2024. But the company stopped reporting subscriber numbers earlier this year, shifting focus to metrics like revenue and profit, a move that has raised concerns about growth.
The streaming giant, whose $517 billion market value is more than the combined worth of Disney, Comcast and Warner Bros Discovery, posted quarterly earnings per share of $7.19, beating estimates of $7.08, according to data compiled by LSEG.
"A strong content slate in the second half of the year and growing traction for its advertising efforts could help support continued revenue gains in the third quarter and beyond," said Seth Shafer, principal analyst at S&P Global Market Intelligence Kagan.
At least 16 analysts raised their price targets on the stock following the results, bringing the median target to $1,385, as per data compiled by LSEG.
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