Netflix Q3 guidance disappoints despite reaffirming full-year outlook

Market Commentary

South African Market Summary

South African equities ended unchanged, with the JSE All Share index edging 0.04% higher to 110,337.36, while the Top 40 slipped 0.02% to 101,983.76. Corporate developments remained: Karooooo reported 19% subscription revenue growth and record operating profit, while Prosus committed to sell its remaining 16.8% Delivery Hero stake to Uber. Toyota South Africa has completed more than 77% of its R10.4 billion investment programme for next-generation Hilux production, supporting manufacturing capacity. Government also outlined plans to attract R750 billion into special economic zones during the current fiscal year, following R890 billion pledged at the investment conference. The initiatives reinforce efforts to revive industrial activity, expand infrastructure and strengthen long-term productive investment, although execution and funding conversion remain important investor considerations.

European Market Summary

European equities edged higher for a third consecutive session, with the STOXX 600 gaining 0.16% to 643.73 as strong corporate earnings were offset by renewed Middle East tensions. Second-quarter earnings for STOXX 600 companies are forecast to rise 16.7%, potentially marking the strongest growth in more than three years, supported by higher energy-sector profits. Delivery Hero shares were little changed after Uber launched a takeover offer valuing the German food-delivery group at $14.8 billion, following a near-70% year-to-date rally. Monetary policy expectations also shifted as surging oil prices revived inflation concerns. Economists expect the European Central Bank to hold rates on 23 July before raising them in September, while markets price two additional increases during 2026 amid elevated energy-price risks.

US Market Summary

US equities retreated as renewed semiconductor weakness outweighed resilient economic data and an encouraging start to second-quarter earnings. The S&P 500 technology sector fell 1.8%, while the Philadelphia Semiconductor Index declined 4.3%, reinforcing the sector’s growing influence over broader market direction. TSMC’s US-listed shares dropped despite a 77% surge in quarterly profit, highlighting demanding valuations after the chip sector’s substantial year-to-date rally. Consensus expectations remain elevated, with S&P 500 earnings forecast to rise 24.8% and technology earnings projected to increase 65.5%. Retail sales, manufacturing activity and jobless claims pointed to continued economic resilience, although weaker pending home sales and subdued builder confidence reflected affordability pressures. Renewed US-Iran hostilities added geopolitical uncertainty, despite signs that diplomatic channels remain partially open still.

Asian Market Summary

Asian equities opened under pressure as weakness in semiconductor shares weighed on regional benchmarks and extended the rotation away from technology into banks and other sectors. Asia’s high chip exposure left markets vulnerable after investors reduced positions in semiconductor names despite robust lender earnings. South Korean markets were closed for a holiday after authorities announced tighter rules for technology-linked exchange-traded funds, including a temporary halt to new listings and higher minimum retail deposits. Geopolitical and policy risks also remained prominent. China criticised Britain’s nationalisation of British Steel and called for fair treatment of Chinese companies. Meanwhile, major Chinese airlines warned of substantial first-half losses, with softer travel demand and higher oil prices threatening profitability during the crucial summer travel season.

Currency Market Summary

The South African rand weakened as renewed hostilities between Iran and the United States lifted oil prices, strengthened safe-haven demand and revived concerns over imported inflation. The escalation presents a risk for South Africa, given its dependence on fuel imports and sensitivity to global risk appetite. Meanwhile, the dollar index held near 100.72 but remained on course for a weekly decline after softer US inflation reduced expectations of an imminent Federal Reserve rate increase. Resilient retail sales and stable labour-market data nevertheless supported the outlook for second-quarter growth, while markets expect policymakers to keep rates unchanged this month. The yen remained near four-decade lows, increasing intervention risk and highlighting divergence between Japanese and US monetary conditions amid elevated geopolitical uncertainty.

Commodity Market Summary

Gold was heading for its steepest weekly decline in six weeks as renewed US-Iran hostilities drove oil prices higher and revived concerns that energy inflation could delay monetary easing. Brent and WTI gained almost 12% over the week, supported by disrupted flows through the Strait of Hormuz and growing risks to Red Sea exports. The escalation intensified after Washington launched successive air strikes near Iran’s southern coast, while Tehran responded with missiles and drones targeting US military facilities across the region. Reports that Iran had asked Houthi forces to prepare for possible disruption of the Red Sea route further increased supply concerns. For investors, higher energy prices strengthen inflation risks, support tighter-for-longer US interest rates and reduce gold’s relative appeal despite elevated geopolitical uncertainty.

Domestic Company News

Karooooo Limited (KRO) +8.75%

Karooooo delivered a strong start to FY2027, with first-quarter subscription revenue rising 19% to R1.35 billion and operating profit increasing 16% to a record R410 million. Cartrack subscribers grew 18% to 2.80 million, while net additions surged 70% to a quarterly record of 142,472, highlighting accelerating platform adoption. Adjusted earnings per share advanced 11% to R9.53, although Cartrack’s operating margin moderated to 28% from 30%. Logistics revenue increased 46% to R177 million, with operating profit up 50%. Management retained FY2027 guidance for Cartrack subscription growth of 18%–24% and Karooooo EPS of R38.50–R40.00. Free cash flow fell sharply as investment in IoT devices and working capital supported faster customer acquisition, while the group maintained a strong net cash position at quarter-end.

Prosus N.V. (PRX) -1.75%

Prosus has given Uber an irrevocable undertaking to sell its remaining 16.8% stake in Delivery Hero at €41.50 per share, subject to Uber’s offer becoming unconditional. The transaction would complete Prosus’s required reduction of its former 26.5% holding following European Commission approval of its Just Eat Takeaway.com acquisition. Prosus previously sold approximately 4.5% of Delivery Hero to Uber and a further 5% to Aspex Management. Uber’s offer represents a 151% premium to Delivery Hero’s one-month volume-weighted average price before the initial Prosus disposal, supporting management’s view that the proposal offers fair value and an efficient regulatory solution. Proceeds will be used for general corporate purposes, although completion remains dependent on regulatory approvals and other offer conditions being fulfilled in full.

BHP Group Limited (BHG) -4.07%

BHP Group Limited reported record iron ore production of 264.7 million tonnes for FY2026, supported by strong Western Australia Iron Ore performance and solid contributions from South Flank. Fourth-quarter output fell 3% year on year to 68.1 million tonnes, but rose 8% sequentially. Copper production declined 3% for the year to 1.95 million tonnes, with weaker output at Escondida and Pampa Norte partly offset by record production at Antamina and improved performance in South Australia. FY2027 copper guidance of 1.65–1.80 million tonnes implies a softer production outlook. Energy coal output increased 9% to 16.4 million tonnes, while steelmaking coal rose 3% to 18.6 million tonnes. Higher realised iron ore and copper prices provided additional earnings support during the reporting period.

Global Company News

Netflix Inc. (NFLX) +0.91%

Netflix expects third-quarter revenue of $12.86 billion and diluted earnings per share of $0.82, both marginally below Wall Street forecasts, signalling a more measured growth phase. Second-quarter revenue reached $12.56 billion, while earnings of $0.80 per share were broadly in line with expectations. Management maintained its full-year objectives and reiterated that advertising revenue should reach $3 billion by year-end. Growth initiatives include advertising, live events, video games and broader use of generative artificial intelligence across content production. Viewing hours increased 2% during the first half, although Netflix will reduce its viewing-hours disclosures to once annually from January 2027. With subscriber reporting already discontinued, investors are increasingly focused on revenue, operating profit and execution across newer business lines for future growth.

UnitedHealth Group Inc. (UNH) +1.16%

UnitedHealth Group delivered a stronger-than-expected second quarter, with adjusted earnings of $6.38 per share materially ahead of the $4.90 consensus estimate. Revenue increased to $112 billion, supported by improved performance across UnitedHealthcare and Optum, while the medical cost ratio declined to 86.7%, outperforming market expectations. Management raised 2026 adjusted earnings guidance to $19.50–$20.00 per share from at least $17.75, signalling increased confidence in the turnaround. Optum operating income rose 29% to $4 billion, reflecting better technology execution and clinical operations. Cost controls, product repricing and higher Medicaid reimbursement supported profitability, although membership declined in certain higher-cost insurance products. Management continues to invest in artificial intelligence and expects Optum’s revenue growth and margins to recover progressively through 2028 under current plans.

Click here for the daily moves of shares, indices and currencies.