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Written by Daniel Sparks for The Motley Fool
Netflix's year-over-year revenue growth has fallen for two straight reported quarters, from a 17.6% peak to 13.4%.
Management's third-quarter forecast calls for about 12% growth, a third consecutive slowdown if it lands.
Engagement, pricing, and advertising trends suggest tough comparisons are doing more of the slowing than demand.
Netflix (NASDAQ:NFLX) is still growing at a double-digit rate. It just isn't growing like it was a year ago.
The streaming service company's revenue rose 16.2% year over year in the first quarter of 2026 and 13.4% in the second, down from 17.6% growth in the fourth quarter of 2025. And management's forecast calls for about 12% growth in the third quarter.
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At about $72 as of this writing, the stock sits more than 40% below its 52-week high and about 10% above its 52-week low.
Is a stock with a shrinking growth rate worth buying anyway? That depends on what's doing the shrinking -- and on how much of the slowdown is already priced in.
The slowdown follows an unusually strong run. Netflix's growth rate climbed all through 2025, going from 12.5% in the first quarter to 15.9%, 17.2%, and finally 17.6% in the fourth quarter, according to the company's shareholder letters. The first two quarters of 2026 have given back part of that climb.
Currency isn't hiding anything, either. Excluding foreign exchange, the first quarter's growth was 14%, the second's was 12%, and management's third-quarter forecast works out to 11% on that basis. The slide shows up on both measures.
Worth noting: the third quarter's 12% is still a forecast, not a reported result. Netflix has reported two quarters of slowing growth, and management expects a third.
Slowing demand would be a business problem. Tough comparisons, on the other hand, can fade on their own as the year-ago numbers reset.
The evidence, I think, points mostly to the second. Growth in 2025 was driven by membership gains, price increases, and a fast-scaling advertising business. Each quarter of 2026 has to top a bigger number than the one before it, so even steady demand can produce a smaller growth rate.
And the demand signals in the company's own numbers look healthy. Members watched more than 97 billion hours of programming in the first half of the year, and viewing grew 2% year over year -- slightly faster than the 1.5% growth Netflix saw in 2025, despite competition from the Winter Olympics and the World Cup. Revenue grew by double digits in every region in the second quarter. Management said its first-half price increases have performed in line with past changes and its expectations. And advertising revenue remains on track to about double this year, to about $3 billion.
Profits, meanwhile, have kept growing through the slowdown. Second-quarter operating income rose 11% year over year, to $4.2 billion. Management still expects an operating margin of 31.5% for 2026, up from 29.5% in 2025, a forecast the company says implies operating income growth of more than 20% this year.
Netflix narrowed its 2026 revenue forecast in July to a range of $51.0 billion to $51.4 billion (13% to 14% growth) rather than cutting it. Run the numbers on what that leaves for the fourth quarter, and it comes to about $13.3 billion to $13.7 billion, or growth of about 11% to 14% over the year-ago period.
In other words, the company's own guidance describes a growth rate leveling off around 12%, not one that keeps falling.
The stock's slide has reset the valuation, too. At about $72 per share, the stock costs about 19 times what analysts expect Netflix to earn next year. At its 52-week high, the same estimate would have put the price-to-earnings multiple in the low 30s.
Sure, 19 times earnings isn't a demanding price for a business guiding to 13% to 14% revenue growth with a rising operating margin. But it isn't an obvious bargain, either. It looks arguably fair if growth settles near 12% -- and it could get expensive in hindsight if the rate keeps sliding into 2027 instead.
So, should you buy Netflix stock anyway? Not yet, in my view. The price already seems to assume the growth rate levels off the way the guidance implies. However, a forecast isn't the same thing as a reported quarter, and the reported numbers are still headed the wrong way.
For investors who already own the stock, though, I don't see much in this slowdown worth acting on. It has followed the path management laid out, and profits have grown right through it.
Of course, the fourth quarter may still miss that range. But I'd treat Netflix as a hold today, and I'd revisit buying once a reported quarter shows the growth rate holding.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.