Netflix stock plunged more than 8% in after-hours trading, reported CNBC Business. Investors balked at the company's earnings forecast, despite Q2 revenue and earnings per share aligning closely with analyst predictions.

Netflix's earnings per share landed at 80 cents, just a penny above the 79 cents analysts had anticipated, while revenue slightly missed at $12.56 billion compared to the $12.59 billion estimate. The company attributed its 13% year-over-year revenue increase to membership growth, strategic price hikes, and a boost in ad revenue. Earlier this year, Netflix raised its subscription prices across all its streaming plans, with results from those price hikes consistent with prior changes and expectations.

For the third quarter, Netflix forecasted a 12% revenue growth, narrowing its full-year guidance to $51 billion to $51.4 billion. This moderate outlook didn't quite match investor expectations, leading to the sharp sell-off. The company's net income for the second quarter was $3.40 billion, compared with $3.13 billion in the same period last year, showcasing a growth in profitability.

Engagement metrics, once a strong point, now face scrutiny as Netflix plans to reduce the frequency of its "What We Watched" reports. The streaming giant called engagement with its content "healthy," highlighting live events as top draws for members, who watched more than 97 billion hours of total content in the first half of this year.

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Netflix's content strategy remains focused, with live events accounting for some of its top programming days, although they represent only a sliver of total viewing hours. As co-CEO Greg Peters noted, "there is not a linear relationship between viewing hours and revenue and profit." Co-CEO Ted Sarandos added that there isn't "any material change" in second season viewership of series versus the first season, addressing concerns about a potential drop in engagement.

Live sports content, a relatively new frontier since 2023, is an emerging revenue stream through advertising. Netflix aims to double its ad revenue to $3 billion, powered by high-demand events such as the Women's World Cup and NFL games. The company introduced its cheaper, ad-supported plan to customers recently as a new revenue driver. Peters mentioned that Netflix often considers its pricing and plan choices, with the possibility of a free tier being explored for certain markets.

In its shareholder letter, Netflix remarked that the "entertainment industry remains dynamic and competitive." The company's bid for Warner Bros. Discovery's assets last year, though unsuccessful, sparks speculation about future opportunities. Yet CFO Spencer Neumann reiterated Netflix's identity as builders, not buyers, maintaining a focus on selective M&A for reinvestment.

Netflix's strategic shift to include an ad-supported plan highlights its response to competitive pressures in the media landscape. However, as Peters mentioned, there are no immediate plans to launch a free tier, despite exploring it as a potential path for certain markets. The company is in "advanced stages" of discussions with advertisers in the U.S., anticipating commitments to close in the coming weeks.