2Q26 Preview: Still Searching for a Catalyst

Research evidence excerpt

2Q26 Preview: Still Searching for a Catalyst

hours growth PREV

to improve from the 2% y/y pace seen in 2H25. Similarweb web visits, which have directionally *Rev. (MM)

tracked reported hours growth, improved from -12% y/y in 2H25 to -8% in 1H26. While we recognize

the limitations of the data, it points to a modest accel in 1H26 hours growth / at least suggests

engagement isn't deteriorating dramatically.

That said, even if 1H26 hours growth modestly improves from 2H25 levels, we're not convinced

it meaningfully changes the near-term debate, particularly as the 2H26 engagement setup looks

challenging as NFLX laps a strong 2H25 content slate (e.g., Stranger Things) and the World Cup

remains a headwind.

While positioning remains negative, we struggle to see many scenarios where the stock gets a

sustained near-term re-rate. Even if rev/OM beat and hours come in better than feared, weak intra-

qtr 3P sub data is likely to keep pressure on the core debate. At the same time, potential M+A (LION,

NBCU spin, etc.) remains an overhang, and the persistent AI loser narrative continues to weigh on

sentiment. On the call, we're most focused on how U.S. churn is tracking vs. prior price increases,

incremental explanations for engagement weakness, if Q2 subs landed below internal expects, and

color on content spend needs past FY26.

Reiterate Buy and $110 PT. The stock continues to trade at a discount to historical levels and we're

not yet convinced 2030 targets are at risk. We recognize the near-term debates but continue to

view NFLX as a ~20% multi-year EPS compounder. Our $110 PT is unchanged and based on ~30x

our FY27 EPS. James Heaney * | Equity Analyst

+1 (212) 336-1171 | jheaney@jefferies.com

FY (Dec) 2024A 2025A 2026E 2027E Jesse Chao * | Equity Associate