Netflix widened operating margins to 33.4% in Q2 2026, but the stock still plunged as management officially buried total watch hours in favor of high-urgency live events.

In ~10 minutes:

• How a phantom tax bill crushed sequential free cash flow.

• Generative AI actively slashing production costs across 300 titles.

• Why a single baseball game outweighs hours of background cartoons.

• Testing the return of global free trials for hesitant subscribers.

Management admitted to explicitly deploying generative AI directly into the editing room to halve costs for complex VFX sequences. Meanwhile, as Wall Street gets cut off from frequent engagement metrics, investors are left to decipher if the push into ads and live sports will fully replace the vintage streaming playbook.

Netflix (NFLX) | Q2 FY2026

AI-assisted production. Feedback/ticker requests: https://x.com/EarnUnscripted.