What happened

Netflix (NFLX -0.74%) stock is trouncing the market in the hours leading up to its Tuesday afternoon earnings announcement. The streaming video giant's shares rose 5% by 2:45 p.m. ET on a positive day for the wider market as the S&P 500 jumped nearly 3%.

That rally erased almost none of the losses that investors have seen in the stock this year, though. Netflix shares remain down nearly 70% so far in 2022. The boost likely reflects hopes that this decline went too far, and that the company will have brighter news to report in its upcoming earnings announcement.

So what

At around 4 p.m. ET, Netflix will reveal operating trends for the fiscal Q2 period, and expectations could hardly be lower heading into that report. Executives projected a loss of roughly 2 million subscribers after all, which would mark among the worst growth performances that shareholders have seen since the company pivoted into its streaming video model over a decade ago.

Concerns heading into that announcement include competition, especially from ad-supported rivals who offer lower-priced options. Netflix is also under general pressure as consumers move away from many of the digital entertainment choices they favored in earlier phases of the pandemic.

Yet much of that bad news might already be priced into the stock, whose market capitalization has plummeted from roughly $250 billion at the start of the year to less than $90 billion today.

Now what

Co-CEO Reed Hastings and his team will likely discuss the success of the latest installment in the Stranger Things series. Netflix is adding an ad-supported tier to its platform as well, which may give it a stronger position to defend its market share.

But the main question heading into today's announcement is whether the company's growth model is still intact. That approach has always involved heavy spending on content to attract new paying members, funding more content spending. That virtuous cycle has been missing in recent quarters, and investors will need to see it return for any stock price rally to stick.