As Netflix approaches its second-quarter earnings report, investors and analysts alike are positioning themselves for what could be another strong showing from the streaming giant. Goldman Sachs recently boosted its price target on Netflix shares to $750 from $670, maintaining a “buy” rating ahead of the company’s July 18 earnings announcement.
The optimism isn’t without foundation. Netflix has demonstrated remarkable resilience in an increasingly competitive streaming landscape, with its advertising tier gaining traction faster than many anticipated. According to Goldman analyst Eric Sheridan, “There’s a lot to like heading into Netflix’s earnings,” pointing to robust subscriber growth trends and evidence of pricing power in key markets.
This bullish outlook follows Netflix’s impressive first-quarter performance, where the company added nearly 9.3 million subscribers globally, far exceeding analyst expectations of 4.8 million. That surge propelled Netflix shares up 9% the day after the announcement in April.
What’s driving this continued momentum? For one, Netflix’s password-sharing crackdown appears to be paying dividends. Initially met with subscriber resistance, the policy has ultimately converted many password borrowers into paying customers. Internal data suggests the company has successfully monetized a significant portion of the estimated 100 million households that were previously using shared accounts.
The advertising tier, launched in November 2022, has evolved from an experimental offering to a substantial revenue stream. “The ad tier is exceeding our expectations on all dimensions,” noted Netflix co-CEO Greg Peters during the last earnings call. Industry sources indicate that advertiser demand has strengthened considerably in recent quarters, with brands particularly valuing Netflix’s ability to reach younger audiences who have abandoned traditional television.
Netflix has also shown remarkable discipline in content spending, focusing on quality over quantity. This strategic shift represents a maturation of Netflix’s business model, emphasizing profitability and return on investment rather than purely subscriber growth at any cost.
Market analysts from Morgan Stanley estimate that Netflix will report approximately 4.7 million net new subscribers for Q2, potentially exceeding the company’s own guidance. Revenue growth is projected at around 15% year-over-year, driven by a combination of subscriber additions and price increases implemented in key markets including the United States, United Kingdom, and France.
However, challenges remain on the horizon. Competition continues to intensify, with Disney+, Amazon Prime Video, and newer entrants like Max (formerly HBO Max) all vying for viewer attention. Additionally, content production costs show little sign of decreasing industry-wide, putting pressure on all streaming platforms to extract maximum value from their investments.
“While we remain bullish on Netflix’s near-term prospects, the streaming wars are far from over,” cautions Michael Nathanson of MoffettNathanson Research. “The key question is whether Netflix can maintain its growth trajectory as competitors improve their offerings and consumers become increasingly selective with their subscription dollars.”
One factor potentially working in Netflix’s favor is the broader economic environment. Despite persistent inflation concerns, consumer spending on entertainment has shown remarkable resilience. Data from the Bureau of Economic Analysis indicates that spending on recreational services has outpaced overall consumer spending growth in recent quarters.
For long-term investors, Netflix’s international growth strategy remains particularly compelling. The company has invested heavily in local-language content production across Europe, Asia, and Latin America, yielding global hits like “Squid Game” from South Korea and “Money Heist” from Spain. These investments position Netflix to capitalize on growth in emerging markets where streaming penetration remains relatively low.
“The international opportunity for Netflix remains substantially underappreciated,” argues Laura Martin, analyst at Needham & Company. “Their first-mover advantage and content localization strategy gives them a sustainable competitive edge in markets with billions of potential subscribers.”
As we await the official Q2 results, one thing seems increasingly clear: Netflix has successfully navigated the transition from high-growth disruptor to profitable market leader. The question now is whether the company can maintain its momentum in an increasingly crowded and complex streaming environment.
Investors will be watching key metrics beyond subscriber growth, including average revenue per user, content amortization trends, and guidance for the crucial second half of the year. Whatever the outcome, Netflix’s performance will provide valuable insights into the evolving dynamics of the global streaming marketplace.
