Netflix management is playing up how new generative-artificial intelligence tools are helping cut costs, but that isn't calming lingering concerns about user engagement and competition.
The media landscape is changing as technology evolves at a rapid pace, and Netflix doesn't want shareholders to think it's getting left behind. The streaming giant provided updates to Wall Street about its use of generative AI on its second-quarter earnings call after the market close Thursday.
Netflix might need to do more convincing, though. Shares fell 7.7% to $68.61 in afternoon trading Friday. The stock has now tumbled 27% this year, far underperforming the S&P 500's 9.3% gain.
Gen AI creates text, photo, and video content from prompts, and has become increasingly more popular each year since the launch of OpenAI's ChatGPT in 2022. Companies have been open about wanting to use AI technology to improve productivity and cut costs. Netflix said it was doing just that on Thursday's earnings call.
Co-CEO Ted Sarandos said that gen-AI workflows now have been used in about 300 of the company's titles, with most of the tech being utilized in post-production. He said that Netflix has turned to gen AI for help with work like enhancing crowds or historical battle scenes.
"We keep in mind that in many of the cases, productions would have left out those key shots, because they just wouldn't have been able to afford them, they wouldn't have been able to do them in the time frames that they're working on. So, those sequences are saved by the availability and access to these GenAI tools," Sarandos said.
It's an interesting time in the media landscape to share updates on how Netflix is using AI in its creative processes. While the tech is supposed to help lower costs and increase the speed at which projects can be accomplished, there's also been pushback by some who say AI ruins creativity and puts jobs at risk.
Still, shareholders typically like any news that a company is bringing down costs.
"We think this usage strikes the right balance with writers and actors -- not replacing human creativity but either making tedious and time-consuming work faster, and/or expanding the realm of content possibilities where humans could not go in the first place," Raymond James analyst Andrew Marok wrote in a note Thursday night. He rates Netflix as Market Perform without a price target.
Netflix reported mixed second-quarter financial results and shared disappointing guidance Thursday night. That alone was enough to send the stock downward, but the company's decision to delay how often it provides engagement updates grabbed most of Wall Street's attention.
Netflix previously published an engagement report called "What We Watched," twice a year. On Thursday, the company said it would start publishing that report annually in the first quarter, beginning in 2027. Investors aren't happy, given there have already been concerns that the company is struggling to maintain high levels of engagement as competition with other streaming services and social media heats up.
"The move of releasing the...report only once a year starting in 2027 (instead of twice a year now) will be seen as an incremental negative, cutting disclosure at the time when it is being focused on most," Marok wrote.
AI once was a term that companies would throw out on their earnings calls to boost confidence about their plans for the future. Netflix showed last night that alone might not be enough anymore.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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July 17, 2026 14:04 ET (18:04 GMT)
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