Netflix's Stock Price Doesn't Match Its Financials - Here's the Gap Investors Should Watch

Netflix (NASDAQ:NFLX) has had a rough 2026 with shares down roughly 20% year to date, weighed down by a failed pursuit of Warner Bros. Discovery, soft forward guidance, and broader concerns about subscriber engagement. For anyone who holds the stock or is looking to check up on your retirement readiness by reviewing what's actually in your portfolio, the selloff might feel like a warning sign.

Digging into the financials, the picture looks quite different. First quarter revenue climbed 16%, free cash flow nearly doubled, and operating margins expanded. Several Wall Street analysts still rate the stock a buy, and the company just authorized one of the largest share buyback programs in media history.

With second quarter earnings set for July 16, here's what the gap between price and performance could mean for you if Netflix sits in your brokerage account.

First quarter revenue and margins outpaced the selloff

Netflix posted first-quarter 2026 revenue of $12.25 billion, a 16% jump from the prior year, according to the company's SEC filing. Operating income rose 18% to roughly $4 billion, pushing operating margin to 32.3%.

Free cash flow surged to $5.1 billion, up about 91% year over year. Management maintained full-year revenue guidance of $50.7 billion to $51.7 billion, reaffirmed an operating margin target of 31.5%, and raised free cash flow guidance to approximately $12.5 billion.

The ad tier is pulling more than half of new signups

Netflix's advertising-supported plan, priced at $8.99 per month in the U.S., now drives more than 60% of new signups in the countries where it's available, according to the company's first-quarter shareholder letter.

At its May Upfronts presentation, Netflix disclosed the ad tier had reached more than 250 million monthly active viewers globally, up from 190 million just six months earlier. The company projects ad revenue will roughly double to about $3 billion in 2026.

Advertiser demand is scaling alongside the audience

Netflix reported working with more than 4,000 advertisers at the end of 2025, a 70% year-over-year increase. Programmatic advertising is already on its way to becoming more than half of the company's non-live ads business, which could help diversify its revenue beyond subscriptions over the next several years.

A $25 billion buyback signals where management sees value

On April 22, Netflix's board authorized an additional $25 billion in share repurchases, per an SEC filing. Combined with $6.8 billion remaining from a prior authorization, the company had roughly $31.8 billion available for buybacks, exceeding its entire 2026 content budget of about $20 billion. In the first quarter alone, Netflix repurchased 13.5 million shares for approximately $1.3 billion, according to the company's shareholder letter.

What the buyback math looks like for shareholders

With roughly 4.2 billion shares outstanding, the total $31.8 billion buyback capacity could retire more than 8% of the company's stock at recent prices, according to IndexBox analysis. That kind of reduction in share count may translate to higher earnings per share over time, which is one reason management tends to deploy buybacks when it views its stock as undervalued.

Netflix's margin lead over Disney and Warner Bros. Discovery

Netflix's 29.5% full-year 2025 operating margin, now targeting 31.5% for 2026, stands well ahead of the competition. Some key comparisons:

• Disney's direct-to-consumer segment posted $1.327 billion in operating income on $24.6 billion in revenue for fiscal 2025, a 5.4% margin, according to Disney's SEC 10-K filing.
• Warner Bros. Discovery's streaming segment generated $1.37 billion in adjusted EBITDA in 2025, a non-GAAP measure that excludes significant costs, per WBD's fourth-quarter shareholder letter.

Why the profitability gap matters for your portfolio

Both rivals are improving, but neither is close to Netflix's profitability at scale. Disney is targeting a 10% direct-to-consumer margin in fiscal 2026, while WBD continues to face restructuring pressures tied to its 2022 merger. If you're comparing streaming investments, this margin gap is one of the clearest differentiators.

The July 16 earnings report is the next inflection point

Wall Street expects Netflix to report second-quarter earnings of $0.79 per share on revenue of about $12.57 billion, reflecting roughly 13.5% year-over-year growth. Goldman Sachs analyst Eric Sheridan maintained a buy rating in July with a $110 price target, citing Netflix's live-events strategy and vertical-video initiative as potential engagement drivers, according to TipRanks. The consensus among 32 analysts tracked by TipRanks is a Strong Buy, with an average price target of roughly $114, implying about 51% upside from recent levels.

The risks investors are watching

Not everyone is bullish. Bernstein analyst Laurent Yoon, while maintaining a buy rating, lowered his price target to $100 from $110 and warned that the FIFA World Cup could temporarily draw viewers away from the platform, according to TipRanks.

"Subscriber growth pressure" is the primary concern behind his revised forecast, Yoon noted. Meanwhile, Benchmark analyst Daniel Kurnos reiterated a hold rating, flagging that third-party data suggests recent price hikes may have hurt engagement. Netflix also missed earnings estimates in two of the past four quarters.

Bottom line

Netflix's stock price and its underlying business performance have diverged sharply in 2026. Revenue growth, expanding margins, a rapidly scaling ad business, and a $25 billion buyback program all point to a company that management believes is undervalued. If Netflix is part of your retirement plan, the disconnect between its current price and its financial trajectory is something to watch carefully.

The July 16 second quarter earnings report could be the moment that the gap either narrows or widens. Investors tracking this stock may want to pay close attention to ad revenue progress, free cash flow trends, and whether management reaffirms or adjusts its full-year outlook.

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