Netflix Inc (NASDAQ:NFLX, XETRA:NFC) heads into its second quarter earnings report with Jefferies reiterating its ‘Buy’ rating and $110 price target, while writing that it sees limited scope for a sustained near-term re-rating despite maintaining a positive long-term outlook on the streaming company.
The brokerage expects investors to remain focused on subscriber trends, engagement, operating margins and management’s outlook, arguing that even stronger-than-expected results may not be enough to shift market sentiment given ongoing concerns around subscription growth, potential merger and acquisition activity and the perceived impact of artificial intelligence.
Jefferies does not expect a meaningful upside surprise in second quarter or full-year revenue guidance, forecasting constant-currency revenue growth of 12% year-over-year for both the second and third quarters, broadly in line with Wall Street expectations. The firm also does not expect Netflix to raise its full-year revenue outlook this quarter, citing soft third-party subscription data.
The analysts are somewhat more constructive on margins, writing that consensus estimates may be underestimating the benefit of Netflix’s US price increase introduced in late March while overstating the impact of Brazil-related tax comparisons. Although Jefferies believes the company’s full-year operating margin guidance of 31.5% could be increased later this year, it noted that visibility on the timing remains limited.
Engagement will also be a closely watched metric. Jefferies expects first-half 2026 viewing hours to improve from the roughly 2% year-over-year growth recorded in the second half of 2025, with third-party web traffic data suggesting engagement has stabilized rather than weakened further.
However, the brokerage does not believe a modest improvement would materially change the investment debate, pointing to difficult content comparisons in the second half of 2026 and the FIFA World Cup as potential headwinds.
On the earnings call, Jefferies expects investors to seek updates on US subscriber churn following recent price increases, explanations for softer engagement trends, whether second quarter subscriber additions met internal expectations, and management’s outlook for content spending beyond fiscal 2026.
Despite its cautious near-term view, Jefferies maintained its ‘Buy’ rating, writing that it continues to view Netflix as “an approximately 20% multi-year EPS compounder” trading below its historical valuation.
Netflix shares traded hands at $75 on Thursday afternoon, down about 20% so far this year. The company will report its Q2 earnings on July 16.
Read More: Netflix heads into Q2 earnings as Jefferies sees limited upside catalyst
