Netflix (NFLX -1.97%) reports second-quarter results on July 16, and it does so from an unusual spot: the business keeps growing, yet the stock has been sliding for a year. Shares trade around $76 as of this writing, down about 42% from the high of $130.23 they set last summer -- even as revenue, profits, and the company's nascent advertising arm all keep climbing. With the report just over a week away, is this a good time to buy the stock?
Let me walk through what the quarter needs to show, and whether the discounted price is worth the risk of another slide.
Image source: The Motley Fool.
A business that keeps growing
Netflix's problem, if you can call it that, isn't the business. In the first quarter of 2026, revenue rose 16% year over year to $12.25 billion, helped by membership growth, a price increase, and a fast-growing advertising business. Its operating margin, meanwhile, widened to 32.3% from 31.7% in the same quarter a year ago. The company has stopped disclosing subscriber counts every quarter, but it topped 325 million paid memberships and is now entertaining an audience approaching 1 billion people.
The streaming service's advertising arm is the piece to watch. Netflix expects ad revenue to roughly double this year to around $3 billion, it now works with more than 4,000 advertisers, up about 70% from a year ago, and the ad-supported plan has become the most popular choice for new sign-ups in the countries where it is offered. For a company that long leaned almost entirely on subscription fees, that second engine matters, because it lets Netflix lift revenue per member without relying solely on price increases. For all of 2026, management is guiding for revenue between $50.7 billion and $51.7 billion -- a 12% to 14% increase -- with an operating margin near 31.5%.
So why is the stock down 42%?
If results are this solid, why has the stock lost 42%? Two reasons. First, Netflix came into 2025 with expectations set impossibly high, and once its guidance stopped clearing an ever-rising bar, that premium began to unwind. Second, the company spent months tangled in a takeover fight. Netflix had agreed to acquire the Warner Bros. studios and HBO Max from Warner Bros. Discovery in a deal with an equity value around $72 billion, which drew a rival bid and a stretch of uncertainty -- before Netflix ultimately walked away and turned to share buybacks instead.
With that distraction behind it, the story is simpler now: a steadily growing business trading well off its highs.
NASDAQ: NFLX
Key Data Points
Buy before the report?
Valuation is where the decision gets interesting. After the slide, Netflix trades at about 25 times earnings and around 23 times the earnings expected over the coming year. For a company still growing revenue in the mid-teens, expanding margins, and doubling its advertising business, that is a far more reasonable price than the stock commanded at its peak.
It is worth appreciating how far the stock has already de-rated. A year ago, Netflix carried one of the richest multiples in big-cap tech. Today it trades at a fraction of its former multiple, even though it is still growing faster than most of its large-cap peers. The company is also throwing off record free cash flow and using part of it to buy back stock, which quietly lifts per-share earnings. None of that guarantees the shares have bottomed, but it does mean today's buyers are paying a far more grounded price than they were 12 months ago.
Of course, there are risks. Streaming is fiercely competitive, and Netflix has to keep spending heavily on content to hold its lead against deep-pocketed rivals. In addition, there are risks associated with buying before July 16. Buying right before an earnings report is a bet on the outcome of a single day. If subscriber trends or another key metric, like revenue growth, disappoints, shares could take a hit -- reasonable valuation or not.
So, is Netflix a buy before the report? For long-term investors, I think the stock is finally priced attractively enough to start a position -- but not to try to make a quick buck from a potential bounce when the earnings report is released. Shares could just as easily fall. If you like Netflix for its long-term potential, though, this looks like a reasonable entry point.
