LIVE NOW : Netflix Second Quarter 2026 Earnings Interview

Have this visual of you geeking out, Craig. It's hard to see. It's hard to see Spencer geeking out, but I can see us geeking out.

Let me take that, Steve. Look, I think when it comes to programming spend, there are three really important takeaways. First, the to remember is that the vast majority of our programming spend goes into the core TV series and film where we have a really strong track record, more than a decade of translating those investments into value for our members and returns for the business. I'm going to come back to that core in just a second. But the second one is that we're really disciplined investors. There isn't some hyper acceleration of content investment. We grow the content spend slower than revenue while we're continuing to invest in a huge addressable market. We're forecasting content expense up about 10% this year. It's a little higher than the 8% we averaged over the last 5 years and below the 14% we averaged over the past decade. The third thing we want you to remember here is that when we expand into new entertainment offerings, new initiatives, we do it gradually. We do it where we believe we can add more value for our members and we do it where we believe we have the right to win. And then we look for the positive signals before we invest at material scale. This is our MO. It's been our MO for some time. You ask how the slate's performing. There's a lot to be happy with in Q2. I Will Find You was our biggest launch of an original series this year. Swapped is on track to become the second biggest original animated film right behind K-pop Demon Hunters, which is exciting. Speaking of K-pop, we have Kdramas like Teach You a Lesson, which is on track to become the second most watched South Korea show ever globally. And it's on track to be our biggest series in South Korea of all time. There's a show called The Polygamist. You probably is not on your radar maybe, Steve, but it's out of AMIA. It's another great example of our understanding of the local markets and the local regions. The Polygamist was a popular novel from Zimbabwe more than 10 years ago from an author named Sue Niati, and the teams adapted that into a soapy series for South Africa where it's now a huge hit and is traveling all over the region and all over the world. In Latin America, we've got a big season that just came back for Rosario Tijeras. This was a show that started its life as a license show from TVA in Mexico. After three successful seasons, we picked it up and produced an original season 4, season 5, and just green lit season 6. So you're seeing the slate perform around the world, which is a really differentiated part of our business. Now with that said, with the core, we're also really pleased with the investment so far in our live programming. It plays a really important role as Greg mentioned earlier, driving acquisition, accelerating ad revenue, fueling conversation, helping us to launch new shows. It's helped us build our, and it's also helping us to understand what are the benefits of live over the entire catalog. So we're ramping up our live event slate. You saw the Kevin Hart roast in Q2, the Major League Baseball Home Run Derby earlier this week. What was really fun at the Derby, we produced an original and exclusive Hot Ones special that we shot on a baseball field to promote Will Ferrell's new series, The Hawk, which just launched today actually. And I think it's a cool example of the intersection between our core, that core series The Hawk, our expansion of new exclusive creator content with Hot Ones with Sean Evans is a best-in-class creator. We're thrilled to be in business together, plus live sports, all coming together on a baseball field and on Netflix around the world. The result there is a highly attractive scalable return on content investment and it ladders up to healthy business metrics like Greg just detailed and our strong growth in revenue, dollar profit and profit margin.

Yeah, thanks for asking, David. I really appreciate the question because in aggregate we are not seeing any material change in our second season viewing compared to season 1's. Our second seasons are performing well within our bands of expectation. You know, very often we see drop off from season 1 to season 2. It's very common in the industry. And it's even more so with us because we launch our show so big. Our global reach, our discovery mechanism, releasing all at once, this enables us to find a very large audience early. So our shows tend to start really big while most other places' shows start pretty small and occasionally grow from there. For example, I just mentioned The Polygamist from South Africa. That show's already had 24 million views in 5 weeks and it's still charting. When we look across the entire portfolio across all the regions, all the content categories, our season 2 falloff is actually slightly improved this year relative to last year. Now, of course, you can pick any five data points to tell any story you want, but I'm going to repeat this: our season 2 falloff is actually slightly improved this year relative to last year. So no changes in release strategies.

Great, thanks for asking. We talked about this a lot last quarter. It was World Baseball Classic on Netflix in Japan was a huge hit. It became our most watched program ever in Japan. It was the biggest baseball streaming event ever. World Baseball Classic is kind of like these other big live events and they behave a lot like our returning seasons of our big shows. They drive disproportionate signups and because of that acceleration, they can exhibit slightly higher churn. But the results are exactly consistent with that trend and in line with our expectations and all of our modeling. So we're thrilled and we're continuing to lean into live events because they have a big outsized positive on the business. They drive conversation, drive net acquisition. So we're going to continue to build out that global live event calendar and include expanded to include some regional live events as well.

Thanks, Greg. Robert Fishman has another question in this category. What's the opportunity for Netflix to launch a FAST platform given the rapid engagement growth in that space? Could Netflix library programming be used as an on-ramp for new subscribers or would you be open to adding third-party licensed content to compete with other FAST channels for incremental ad dollars?

Great. Thanks, Greg. Next is from John Hodulik of UBS. With the addition of video games and more recently vertical video clips and podcasts, what other content formats are interesting from a long-term roadmap perspective, and how should we gauge the success of these initiatives?

Well, let's not get into areas that we may be exploring here, and let's not pre-announce anything. But I am pleased with the early progress we're making with vertical clips for viewing on mobile and certainly video podcasting. We mentioned in the letter we announced a partnership with publishers like Kai Nasty and Hurst and people. So we're going to bring on some lifestyle content on the service next month. With the podcast we're super encouraged with the viewing patterns that we're seeing. They have convinced us that this viewing is definitely incremental for us. We're seeing that in daytime viewing. So we're engaging our members outside of prime time where we historically have done most of the engagement on Netflix. Keeping in mind that professional long-form content is pretty small part of mobile, it's exciting to see that our video podcasts are out-indexing on mobile for us. So it's really great progress on both fronts. It's really important for us to meet our members where they are with the kind of entertainment that they're trying to enjoy. So we've been building out this great lineup of podcasters including a mix of owned and licensed with creators like Martha Stewart, Kate and Oliver Hudson have a great new one. We're thrilled to have Jay Shetty's On Purpose exclusively on Netflix. Our members are starting their day with The Breakfast Club. They're loving the official Bridgerton podcast. Bill Simmons, Pete Davidson, Brian Williams, just to name a few. These are examples of us continuing to evolve and deliver members more entertainment value and more ways to engage with stuff they love. To take a step back and contextualize this, over the last 15 years, the definition of TV has broadened and our definition has changed along with it. It's easy to forget, but if you rewind the clock to say 2013, we had a single prestige English language scripted drama show. No unscripted, no local language, no originals, no comedies, no competition shows, and now we're the number one creator of original programming around the world. Just this week, the Emmy nominations were announced and we have an Emmy nomination in nearly every category. We didn't even know back in that first year if House of Cards would qualify for the Emmys. There was a bunch of debate as to whether or not it was TV. These just announced nominations, I think, are a testament to the quality, the quantity, and the variety of our original programming. These expansions are evolutionary, not revolutionary. These are expansions on the same continuum that we started on years ago, adding new things as they become available to us as we see signals that our consumers will get value including it in their Netflix subscription. That continuum has served our members and our business really well. So we're really excited about the progress.

Thanks, Greg. From Sean Diffley of Morgan Stanley, there's a question on pricing. Has there been any change in the receptivity to price hikes this cycle? And how do you think about the timing and magnitude of taking price? In other words, first quarter versus fourth quarter seasonality which is historically a stronger period.

Thanks, Greg. The next question is from Rich Greenfield of Lightshed Partners. How should we think about reports of Netflix bringing back free trials in select markets? What provoked these tests? Are they a function of increased competition, market saturation, or both?

Thanks, Craig. Our next question is from Vikram Kesabotla of Baird. His question is: Netflix has made progress on its cloud-first video game strategy this year including the addition of several new titles. How are these games performing on the platform so far? And how should we expect the video game offering to evolve going forward?

I'll start by reminding folks of the market opportunity here. This is roughly $150 billion in consumer spend excluding ads revenue. We've been building some solid foundations. Now we're seeing exciting positive signals that help inform and give us increased conviction in our future growth and the nature of that growth here. You mentioned the cloud-based strategy, those cloud-based TV games. We really see it working. FIFA and Unhinged became our two most successful cloud game debuts, really solid numbers that put it in the top tier of game performance for us. Another big positive sign is that since last October, eight months ago, when we really scaled up this cloud initiative, monthly active players for cloud games have increased 11x and adoption is significantly ahead of that curve that we had for mobile games with even higher retention value. So we're definitely excited about that and focused on scaling up cloud games. We're also seeing positive signals with kids games. Netflix Playground, which is our app for kids games with no ads, no in-app purchases, curated set of games, very safe space. We've seen 3x growth in daily players since that launched. That's driven more engagement in kids mobile games which is up 600% year-over-year. So that's super exciting to see as well. We're just getting started here. We're scratching the surface in terms of what we think the total potential of the space offers for us. You're going to see us continue to calibrate, refine our level of investment here, which is still very small relative to our overall content spend, based on demonstrated performance, based on what is working for our members and what's delivering returns to our business.

I'll take that. So you're right, Jessica, we do benefit in a number of ways from the tremendous scale that we worked so hard to build over the last 20 years. We've invested in a number of areas of the business. Look at our tech investment where we spend billions of dollars every year and as a result we have best-in-class discovery, personalization, plus a bunch of great R&D and innovation including in production, in distribution, in data that we can draw on to constantly improve every aspect of the business. On the breadth and depth of our content catalog, these in combination all deliver this kind of flywheel of advantages. We have the biggest, most engaged audience in the world. Creators and advertisers love that. We lead the industry in monetization. We have better programming ROI because we spend across this global footprint and very often that programming is very travelable. This is good for our members, good for our business. It creates a really healthy model for organic growth. Greg mentioned TF1 earlier. I think being able to bring that scale to work with partners like TF1 in France to bring content to our members in multiple ways and multiple business models really helps when we can bring that distribution scale to local players. Finally, Jessica, regarding consolidation, the industry's been consolidating for over 10 years, so this isn't new. We focus all of our energy on pleasing our members and sustaining healthy growth for the business.

Okay, great. Well, look, it's early days for Interpositive, but we're broadly seeing that Gen AI is starting to have an impact across hundreds of our productions. It's important to note that we have other Gen AI tools in addition to Interpositive. We're thrilled with the speed they're bringing to market for us. But we also have Eyeline and we have our animation lab and what's cool is that they're all working together to drive innovation. We said in the letter, but Gen AI is scaling quickly across the entire creative process from concept to pre-vis, through post and delivery. We're making higher quality output more quickly and efficiently than we could have using traditional methods. So Gen AI workflows now have been used in roughly 300 of our titles, with the largest concentration right now on post-production. But we're leveraging Gen AI for really complicated shots and sequences. We called this out in the letter, but things like enhancing crowds or historical battle scenes, those kind of things. Keep in mind that in many cases, productions would have left out those key shots because they just wouldn't have been able to afford them or do them in the time frames they're working on. Those sequences are saved by the availability and access to these Gen AI tools. On the content side, we believe it takes great artists to make something great and AI is not changing that. AI will give creatives better tools to bring their visions to life. Movies are being made by people who make movies. AI provides them with better tools to make them even better. Today, our talent leverages tools for things like set references and pre-vis and VFX and sequence prep and shot planning. It just makes the production itself so much more smooth and efficient and fast. That's just the beginning. We're seeing it across the entire production life cycle. Those use cases are scaling faster and faster. Our documentary series we just released called American Experiment features 17 minutes of AI-enhanced footage. It enabled us to expand the scope of the series in ways that just wouldn't have been feasible before. Those 17 minutes, Sean, were produced twice as fast and at half the cost of previous options. So by equipping creatives with these tools, we believe they're going to enhance their abilities and we are going to have better and more impact for every dollar we spend on our programming. So content creation timelines can be shortened and quality can be enhanced. The cost savings will likely be reinvested into more content on the service which fuels high-quality engagement and that whole revenue profit flywheel that we've been talking about from day one.

Well, I'll take this if you don't mind, guys. Dan, we're not going to comment on market speculation, but I'd like to take the opportunity to remind everyone about our core philosophy. We have multiple ways to achieve our goals: producing, licensing, partnering. We're constantly seeking ways to allocate our resources in the most attractive options to maximize value for our members and delivering return for our investors. As we've said, we're primarily builders, not buyers, and that remains the case today. Others will speculate about our intent because they have their own reasons for that. But our track record is clear that we have a very high bar to do any big M&A. Spence, you want to add?