What happened

Shares of Netflix (NFLX 0.70%) outperformed a rising market this week. The stock jumped 18% through Thursday trading, according to data provided by S&P Global Market Intelligence, compared to a 3.5% surge in the S&P 500. Shares remain in deeply negative territory so far in 2022.

This week's rally was sparked by a well-received earnings update from the streaming video giant's management team.

So what

Netflix issued its second-quarter earnings results on Tuesday afternoon, and the announcement allowed investors to breathe a collective sigh of relief. Expectations were low heading into that report after the company projected 2 million subscriber losses.

Netflix did shed subscribers for a second straight quarter. However, the actual figure was less than 1 million. The company projected a quick return to user growth ahead, too, citing stabilizing growth trends that improved throughout the period.

In a letter to shareholders, co-CEO Reed Hastings and his team expressed confidence about both Netflix's core growth approach, as well as its branding around binge-watching TV. The platform's market share reached a new high of 7.7% in the core U.S. market in June, executives noted, amid a huge reception to the latest season of Stranger Things.

Now what

Netflix's sales trends are still far below the 20% growth rate that executives believe represents a worthy goal. Gains will slow to just 5% in Q3, in fact. But most of that deceleration is due to currency exchange swings. Adjust for those moves, and sales growth is stabilizing at about 13% right now.

Meanwhile, Netflix has a bright long-term cash picture now that the company has finished transitioning the business into delivering mostly exclusive content. As a result, investors are excited about the prospect for expanding cash flow over the next several years. If the company can pair those gains with a return to faster membership growth, then earnings growth might accelerate sharply in 2023 and beyond.