Netflix, Inc. Q2 FY2025 earnings call

• Content: The back - half of the year has a strong slate with shows like Squid Game 3, Wednesday, Stranger Things, and a great movie slate including Happy Gilmore 2, new Knives Out, etc. Original animation such as KPop Demon Hunters is successful. - Advertising: U.S. upfront is nearly complete with deals in line or slightly better than targets. Netflix Ad Suite rollout was smooth across all countries with increased programmatic buying and plans for additional demand sources and new features. - Live events: Excited about existing strategy with progress in concurrent live events like Taylor vs. Serrano and WWE Smack Down. - GenAI: AI - powered tools are helping creators in production, e.g., El Eternaut used GenAI for VFX. - Gaming: Evolving gaming ambitions with partnerships like GTA and Roblox agreement, ramping investment in gaming. - UI/UX: New UI/UX launched with better performance than prelaunch testing, designed for new content types.

Revenue guidance was increased to $44.8 - $45.2 billion, up from the prior guide of $43.5 - $44.5 billion. It primarily reflects FX impact from the weakening dollar, but also healthy member growth with pick - up at the end of Q2, strong back - half slate, and nice momentum in ad sales. Operating expenses are essentially unchanged, leading to an updated full year reported margin up 1 point to 30% and a 50 basis point increase in FX neutral margin.

• Full year revenue guidance was increased to $44.8 - $45.2 billion from the prior range. - Operating margin target: Full year reported margin is up 1 point to 30%, and FX neutral margin is up 50 basis points. - Content expenses are expected to ramp in Q3 and Q4 due to heavy slate and marketing. - Ad sales are on pace to roughly double revenue in the year, ahead of beginning - of - year expectations.

Q: Since the revenue increase in your forecast is primarily FX - driven, curious about components of constant currency increase.

A: Spencer Neumann said the revenue increase reflects FX impact from the weakening dollar, healthy member growth picking up at the end of Q2, strong back - half slate, and nice momentum in ad sales. Operating expenses are unchanged, leading to updated full year reported margin up 1 point to 30% and FX neutral margin up 50 basis points.

Q: Why is operating margin guidance for the full year only 30% after the upside in 2Q and a forecast of 31.5% for the third quarter?

A: Spencer Neumann said it is mostly timing, with content expenses to ramp in Q3 and Q4 due to heavy titles, live events, marketing, and ad sales infrastructure build - out.

Q: How has your view of the consumer and the macro economy changed over the last 90 days?

A: Gregory Peters said consumer sentiment and broader economy metrics from the business are stable, retention is stable, plan mix and price changes are in line, engagement is healthy, and entertainment including Netflix is resilient.

Q: Can you share any data points around your upfront negotiations?

A: Gregory Peters said U.S. upfront is nearly complete, deals with major agencies are in line or slightly better than targets, and advertisers are excited about growing scale, engaged audience, own ad tech stack, and slate.

Q: How have advertisers in the U.S. responded to the Netflix Ad Suite rollout since the April launch?

A: Gregory Peters said rollout was smooth across all countries, had good performance metrics, increased programmatic buying, and plans for additional demand sources and new features like interactivity in the second half.

Q: 1% engagement growth year - over - year suggests engagement is down year - over - year on an average per member basis.

A: Gregory Peters said focused on owner household basis engagement, which has been relatively steady over the past 2.5 years, and is optimistic about engagement growth in the second half due to strong slate.

Q: How do you think about the business currently as being 'head boosted or head driven'? And are you confident that both original and licensed content momentum can continue in 2026?

A: Theodore Sarandos said it is not about single hit, but a steady drumbeat of shows, films, etc. Confident about back - half of 2025 and 2026 with strong slate of returning and new shows and movies from around the world.

Q: Are you concerned by the stagnation in your viewing share domestically? Do you need to spend more on programming or spend differently to materially move your viewing share higher?

A: Theodore Sarandos said goal is to grow share long term, content amort has grown, and will continue to reinvest to improve service and sustain healthy revenue growth.

Q: Can you provide more information on the TF1 partnership? Why did you choose to add TF1 in France as opposed to other broadcasters as your first partner? Why is now the right time to create such a partnership? Should we anticipate similar partnerships in other countries?

A: Gregory Peters said partnership is for expanding entertainment offering, need for more variety, right time due to enabling capabilities, chose TF1 as leading local programmer in big territory, and may anticipate similar partnerships in future.

Q: With reports suggesting Apple is now in the driver seat for F1 rights, plus UFC and MLB still looking for new deals and the NFL may be looking to come to market a year earlier, can you share updated thoughts on how you are approaching sports rights for Netflix and where you draw the line on something that can move the needle?

A: Theodore Sarandos said sports are subcomponent of live strategy, remain focused on ownable big breakthrough events that make economic sense, and are excited about existing strategy and events like Canelo vs. Crawford, SAG Awards, WWE, NFL.

Q: What investments have you made to increase your capabilities in producing live events? What have you been able to do in - house in 2025 that you couldn't do last year?

A: Theodore Sarandos said use partners and self - producing as scaling tool, Gregory Peters said current live capabilities are much improved, having had first concurrent pair of live events last Friday.

Q: What are the learnings from the success of KPop Demon Hunters? More animated musicals with fictional bands, perhaps?

A: Theodore Sarandos said original animation success is important, mix of music and pop culture matters, and is excited about future animated musicals like In Your Dreams.

Q: Netflix continues to broaden content genres, notably with live sports and the recently announced TF1 partnership. Is there a path to additional tiers of service based on types of content available? Or will Netflix always make all content available at the ad - free/ad - supported price points?

A: Gregory Peters said remain open to evolving model with principles of choice, accessibility, reasonable returns, and bundle is likely to remain an important feature.

Q: Help us understand why your new UI/UX is so important as you expand live content. Beyond live, can you provide some color on what metrics have improved since the launch of the new UI such as speed of users finding a title and change in failed sessions?

A: Gregory Peters said new UI is designed for new content types, has better performance than prelaunch testing, and is seeing improved metrics like users finding titles and failed sessions.

Q: YouTube is the only streamer that exceeds Netflix in terms of U.S. share of TV time. Do you see an opportunity to bring notable YouTube creators and their content exclusively to Netflix? How big could this opportunity be?

A: Theodore Sarandos said want to be in business with best creatives, some YouTube creators like Ms. Rachel work on Netflix, Gregory Peters said market for entertainment is large, compete for most profitable moments, and focus on 80% of TV view share not won by Netflix or YouTube.

Q: Could you please talk about your generative AI initiatives? Where do you think GenAI will be most impactful over time, revenue or expense efficiency?

A: Theodore Sarandos said AI helps creators in production, e.g., El Eternaut used GenAI for VFX. Gregory Peters said GenAI is impactful in member experience personalization, advertising, with room for improvement in recommendation and conversational experiences.

Q: With your evolving gaming ambitions, including partnerships with Grand Theft Auto and the recently announced Roblox agreement, can you talk to near - term monetization opportunities within gaming?

A: Gregory Peters said near - term monetization is similar to other content categories, ramping investment in gaming, seen good progress with licensed games, will roll out more interactive experiences, and need more scale before monetization model evolves significantly.

Q: Given your healthy balance sheet and what appears to be a coming wave of M&A in media globally, are there certain types of assets that would strengthen your moat, i.e., what is your view of owning successful IP or studio assets as they come to market?

A: Spencer Neumann said continue to be choosy, look at opportunities that are big, strengthen entertainment offering, capabilities, accelerate strategy, predominantly focus on organic growth and returning cash to shareholders