Netflix reported record net income of $13.65 billion over the past four quarters, surpassing its previous record of $10.98 billion for all of 2025. Despite this financial strength, Netflix stock has fallen approximately 35 percent from its 52-week high of $126.71, trading near $82 after a recent bounce from $72 earlier this month.
The record includes a $2.8 billion pre-tax termination fee ($2.3 billion after tax) collected in the first quarter from its failed Warner Bros. Discovery acquisition. Strip out that one-timer and Netflix's operating income still hit a record $14.4 billion over the past four quarters, exceeding the $13.3 billion generated in all of 2025.
The operating momentum is the story. Second-quarter operating income rose 11 percent year-over-year to $4.2 billion. Management projects a 31.5 percent operating margin for 2026, up from 29.5 percent in 2025—implying more than 20 percent operating income growth this year despite market concerns.
The repricing stems from revenue deceleration. Year-over-year growth peaked at 17.6 percent in Q4 2025, slowed to 16.2 percent in Q1 2026, then to 13.4 percent in Q2. For Q3, management forecasts 11.7 percent growth. Full-year 2026 revenue guidance of $51.0 billion to $51.4 billion implies 13 to 14 percent growth, with advertising revenue projected to roughly double to about $3 billion.
At the 52-week high of $126.71, Netflix traded at roughly 50 times 2025 earnings of $2.53 per share—a multiple that priced in sustained mid-to-high-teens revenue growth for years. The current price reflects a more grounded view. Shares now trade at about 25 times reported earnings, or 31 times adjusted for the termination fee, and roughly 21 times expected 2027 earnings.
The sell-off was warranted. The stock has been repriced for materially slower growth. But Netflix is not yet cheap enough to be a compelling buy.
