Netflix Earnings: Shares Trail Q2 Buyback Price by 20%

Netflix reports third-quarter results on Tuesday, Oct. 20, at about 4:01 PM ET, which is 1:31 AM IST on Wednesday, the company said. Before then, its last quarterly filing shows how much it paid for its own stock. In the second quarter Netflix repurchased 52,934,688 shares for $4.7 billion, excluding the 1% federal excise tax on buybacks, according to its 10-Q for the quarter ended June 30. Its monthly table puts the average price paid at $97.47 in April, $88.68 in May and $79.08 in June. Weighting those months by shares, the quarter's average works out to about $87.96 a share, by TradeFlock's estimate.

The stock closed at $70.53 on Friday, Oct. 16, according to Yahoo Finance, about 19.8% below that average, by TradeFlock's estimate. On Monday it traded at $69.14 at 9:35 AM ET (7:05 PM IST), down 2.0% from Friday's close. At Friday's close, the shares bought in the second quarter would be worth about $3.73 billion against roughly $4.66 billion paid, a gap of about $0.92 billion, by TradeFlock's estimate. That is a market value comparison, not an accounting loss. Repurchased shares are not marked to market, and Netflix does not report a gain or loss on them.

Netflix Bought More as the Price Fell

The pace picked up as the shares got cheaper. June was the biggest month of the quarter, at 19,474,436 shares, compared with 16,922,312 in April and 16,537,940 in May. The filing does not say why the pace changed, and the purchases were made under an open market program that leaves timing to management. Netflix called the $4.7 billion its largest quarter of share repurchases in its July 16 letter to shareholders. The board added $25 billion of authorization in April, leaving $27.1 billion available at June 30.

The months before put the quarter in context. Netflix bought no stock in January or February. Its merger agreement with Warner Bros. Discovery ended on Feb. 27, and the company then repurchased 13,497,098 shares in March at an average of $94.14, for $1.3 billion, according to its first-quarter 10-Q. Across March through June, it bought 66,431,786 shares for about $5.9 billion, at an average near $89.21, by TradeFlock's estimate. At Friday's close those shares would be worth about $4.69 billion, roughly $1.24 billion less than Netflix paid, by the same estimate. The stock closed 2025 at $93.76, so it is down about 24.8% this year through Friday.

Buybacks Ran Ahead of Free Cash Flow

Netflix generated $1.5 billion of free cash flow in the second quarter, down from $2.3 billion a year earlier, a drop the letter tied to higher cash tax payments due in part to the Warner Bros. termination fee. Paramount Skydance paid Netflix that $2.8 billion fee on behalf of Warner Bros. Discovery in the first quarter, the 10-Q says. Second-quarter buybacks were about three times that quarter's free cash flow, by TradeFlock's estimate. Over the first half, free cash flow totaled about $6.6 billion, by TradeFlock's estimate, a little more than the $5.9 billion spent on stock. Netflix still expects about $12.5 billion of free cash flow for 2026. It ended June with gross debt of $14.4 billion and cash and cash equivalents of $9.1 billion, and said it plans to refinance $1 billion of debt maturing later this year.

The buybacks have reduced the share count. Fully diluted shares were 4,261 million in the second quarter, down from 4,349 million a year earlier, or about 2.0%, by TradeFlock's estimate. TradeFlock has covered how Paramount Skydance won Warner Bros. and Netflix shares rose.

What to Watch in the Q3 Report

Netflix's own forecast for the third quarter calls for revenue of $12.86 billion, an operating margin of 33.2% and diluted earnings of $0.82 a share. The report and the 10-Q that follows should show how many shares it bought from July through September and at what price. The stock's daily closes in that quarter ranged from $67.60 on July 20 to $82.73 on Sept. 2. TradeFlock is not predicting the size of any third-quarter buyback. If Netflix kept buying, its average cost would likely come in below the second quarter's, since every third-quarter close was below $87.96. Other open questions are whether the June pace continued and how management weighs repurchases against the $1 billion refinancing and its cash balance.

The stock fell 7.3% the day after the second-quarter report, from $74.35 on July 16 to $68.95 on July 17, even though the letter said revenue and operating margin were in line with guidance. Results that meet or beat expectations do not guarantee a rise, as when Best Buy's stock fell after it raised its fiscal-year outlook. Prices here are Yahoo Finance closes, plus Monday's 9:35 AM ET quote. The averages above include the costs Netflix counts in its monthly table and exclude the excise tax.

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