Netflix faces earnings risk after stock’s US$257 billion wipeout

Improved engagement is particularly crucial to investors because it indicates that more people are subscribing and watching Netflix programs. Photo by Mario Tama/Getty Images

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Netflix Inc. has been one of the worst stocks in the market over the past 12 months as concerns about the video-streaming giant’s plans and prospects refuse to go away. Now, investors worry that its earnings report after the close will confirm those fears.

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The shares have lost about 45 per cent since hitting an all-time high on June 30, 2025, putting them among the 20 worst performers in the S&P 500 Index over that time and wiping out US$257 billion in market value. They’ve slumped 31 per cent since mid-April, when Netflix’s previous earnings report included a weak forecast and the news that Chairman Reed Hastings, the company’s co-founder and public face, was stepping down. This was just a few months after Netflix withdrew from the bidding to buy Warner Bros Discovery Inc., which ultimately inked a deal with Paramount Skydance Corp.

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Shares were down 0.3 per cent on Thursday.

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Concerns about the company’s audience engagement and threats of competition have only been building since then. Last month, Meta Platforms Inc. announced that it’s exploring new formats for its Instagram for TV platform, suggesting more competition in the streaming arena. Meanwhile, movie theatres have experienced something of a revival, with audiences flocking to unexpected hits like Backrooms and Obsessions. Perhaps not surprisingly, Netflix is being trounced by stocks like Cinemark Holdings, Inc., Imax Corp. and AMC Entertainment Holdings Inc. this year.

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All of which explains why these results represent something of an existential moment for Netflix shareholders. And it doesn’t help that the stock has fallen after each of its last four earnings reports.

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“Right now, the idea of disruption is in the ether,” said Conrad Van Tienhoven, portfolio manager at Riverpark Capital, which holds Netflix shares. “We’ve had third-party data showing lower engagement, we have Netflix no longer giving subscriber numbers, and we have it looking at M&A for the first time. All of that makes up a trail of breadcrumbs that has led to the stock being where it is now. I hope the company realizes how important this call will be to change the view, especially since Reed Hastings is no longer around.”

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Focus on Engagement

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Improved engagement is particularly crucial to investors because it indicates that more people are subscribing and watching Netflix programs. The company is struggling to get viewers to stick with its shows for more than a season, and it reportedly discussed adding live channels and bundling other subscription-based streaming services to gain better traction.

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“Trying to understand what they’re going to do to improve engagement moving forward is going be key,” said Hanna Howard, a portfolio manager at Gabelli Funds, adding that a strong outlook would be better for lifting shares than solid quarterly results. “I think that some people are viewing their attempt at Warner Brothers as kind of a way to combat the engagement concerns and obviously that didn’t pan out.”

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There have been indications that Netflix may be interested in other acquisitions. Last month, it lost out to Fox in its pursuit of Roku, according to a report by Semafor. And it supposedly was among the companies interested in buying Lionsgate, according to the same report, although Netflix denied it was considering a bid.