After a stellar Q1 and a sustained rally in the share price since then, investors are looking for a bumper Q2 report card and potential upgrade to the full-year guidance.

In April, the company reported a major earnings beat for its first quarter, with revenue up 13% and shares rallying solidly since. The company said better-than-expected revenue growth was down to higher advertising and subscription revenues.

It followed the move in January to increase pricing – lift its standard plan to $17.99 a month, its premium plan to $24.99 and the ad-supported plan to $7.99. Netflix reported revenue of $10.54 billion, higher than Wall Street’s estimates.

Nevertheless, the company stuck to its full-year revenue guide of between $43.5 billion and $44.5 billion.

Q1 was the first time that Netflix did not break down subscriber numbers – the metric that had been a key driver for NFLX is move on earnings updates. So investors are focusing on more traditional financial measures of health – revenues, profit margins and advertising dollars.

Advertising Dollars

Netflix is increasingly leaning on advertising revenues to boost its bottom line. This is a capital-light growth lever for the company and is important to it achieving its goal of hitting $8bn in free cash flow this year.

“A key focus in 2025 is enhancing our capabilities for advertisers,” Netflix said in April, shortly after launching its in-house ad tech platform in the US, with plans to roll it out to other markets after. “We believe our ad tech platform is foundational to our long-term ads strategy,” the company said. “Over time, it will enable us to offer better measurement, enhanced targeting, innovative ad formats and expanded programmatic capabilities.”

Margin Growth

Management guided full-year 2025 operating margins of 29%, with Q2 expected at 33%. This suggests elevated cost pressures in the second half of the year from increased sales and marketing spending, as well as expected higher content production costs, particularly as it expands into live sports. Look for any change in the profit margin guidance here as a potential catalyst for the stock.

A question mark hangs over Trump’s threat to impose tariffs on films made outside the US – watch for anything from management around this on the earnings call but it’s unlikely to be reflected in the financial outlook yet.

What to Expect from Q2

Wall Street estimates Q2 revenue of a little more than $11 billion, which would imply growth accelerating to 15.6% on a year-on-year basis.

Pre-tax profit is expected to rise 41% to $3.55 billion, while earnings per share is forecast to rise to $7.07, up from $6.61 in the previous quarter.

Analysts Raise PTs

KeyBanc raised NFLX target price from $1,070 to $1,390, while Canaccord Genuity raise its estimate to $1,575, close to the Street-high target price of $1,600. Goldman Sachs and Barclays have also recently hiked their PTs for the stock ahead of the earnings release.

That said, some analysts are less bullish. Seaport Global downgraded the stock to a “Hold.” JPMorgan also downgraded Netflix stock in May, with analysts flagging valuation concerns after the run up in the stock this year – it's rallied 40% YTD and 90% in the last 12 months. The stock now trades at more than 50x forward earnings – well above its peers and above its 5-year average.