Netflix’s Ad Engine and NFL Push Face Earnings Reality Check as Shares Slump

Netflix shares flash oversold signals ahead of July 16 Q2 report, but advertising revenue doubling, live sports expansion, and $25B buyback fuel bullish outlook.

The streaming giant heads into its second-quarter earnings report on July 16 with a technical picture that’s starting to flash oversold signals. Netflix shares have shed roughly 5% over the past 30 days, landing at €71.33, a far cry from the $134.12 52-week peak touched last June. The relative strength index sits at 34.7, inching toward the classic oversold threshold of 30. Yet the fundamental story — powered by advertising, live sports, and a massive capital return plan — tells a more bullish tale.

Advertising has emerged as Netflix’s fastest-growing revenue engine. The ad-supported tier now boasts 250 million monthly active users globally, a 32% jump from 190 million just six months ago, according to TD Cowen analyst John Blackledge. The tier is drawing 40% of all new sign-ups, and advertising revenue doubled to $1.5 billion in 2025. Management is targeting another doubling to roughly $3 billion in 2026. That trajectory is a key reason Wall Street remains broadly upbeat: 37 of 50 analysts polled by S&P Global rate the stock a buy, with the average price target sitting at $114.56. Bank of America reaffirmed a $125 target in May, while BMO’s Brian Pitz goes even further at $135, citing gaming and podcasting as additional engagement drivers.

Live sports are playing an increasing role in attracting — and retaining — subscribers. Netflix aired more than 70 live events in the first quarter alone, highlighted by the World Baseball Classic, which drew 31.4 million viewers in Japan and sparked the single biggest day of new sign-ups in Netflix Japan’s history. The company is deepening its NFL commitment: it will air a Christmas Day doubleheader, expand its package to five games, and broadcast the first-ever NFL game in Australia exclusively on Netflix. A Thanksgiving Eve matchup between the Green Bay Packers and Los Angeles Rams has also been added. Co-CEO Ted Sarandos has described the strategy as targeting “breakthrough events” rather than full season rights, a model that maximizes reach without the long-term cost burden.

A $25 billion share buyback program authorized in April 2026 lends additional support. At the end of the first quarter, Netflix had $6.8 billion remaining from a prior authorization, which had been paused during an acquisition process and then resumed. Free cash flow for the full year is forecast at $12.5 billion, bolstered by a $2.8 billion breakup fee from the scuttled Warner Bros. Discovery deal. The company’s guidance for 2026 calls for revenue between $50.7 billion and $51.7 billion — representing 12–14% growth — and an operating margin of 31.5%. Second-quarter revenue is targeted at 13% growth, though content costs are front-loaded in the first half due to title timing, with amortization growth expected to slow to mid-to-high single digits in the second half.

Three overhangs have weighed on sentiment: the failed Warner Bros. acquisition interest, a tax dispute in Brazil, and a Q2 revenue forecast that disappointed some investors. That explains why shares are down despite a solid first quarter in which Netflix earned $1.23 per share, beating consensus by $0.47, on revenue of $12.25 billion (up 16.2%). Insider selling hasn’t helped optics either. Co-founder Reed Hastings unloaded 386,700 shares in early June under a pre-arranged trading plan that had been in place since August 2023. He still holds roughly 21.16 million shares.

Valuation, however, remains in line with the sector. Netflix trades at 25.9 times earnings, nearly identical to the industry average of 25.7 times. A discounted cash flow model points to a fair value of roughly $95 per share, implying about 13.5% upside. The real test comes after the market closes on July 16, when investors will look for proof that advertising momentum, live sports engagement, and margin discipline can close the gap between a beaten-down stock price and solid underlying fundamentals. Competition is not standing still — Amazon Prime Video holds Thursday Night Football and NBA rights, while Disney has folded ESPN into Disney+ with NFL, NBA, college football, and golf coverage. Netflix plans to spend $20 billion on content in 2026, a figure that will need to justify future price increases and advertising growth in the quarters ahead.