Key Takeaways:
- Netflix hit a $327 billion market cap as Q1 free cash flow surged 91%
- Full-year 2026 revenue guidance held at $50.7 billion to $51.7 billion
- Ad business on track to double to $3 billion with 37 analyst Buy ratings
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Netflix hits $327B market cap as Q1 free cash flow surges 91%
Netflix reported Q1 2026 revenue of $12.25 billion, up 16% year over year and beating consensus of $12.17 billion, as free cash flow surged 91% to $5.09 billion.
"The results validate our strategy of investing in content quality and the ads business," Co-CEO Greg Peters said on the earnings call. "We are maintaining our guidance and strong outlook for organic growth that we established for 2026."
Net income reached $5.28 billion, up 82.8% from a year earlier, boosted by a $2.80 billion termination fee tied to the abandoned Warner Bros. deal. Excluding that one-time item, operating income expanded 18.23% to $3.96 billion. The company's return on equity stands at 48.5%.
Growth was broad across regions. North America rose 14%, EMEA 17%, Latin America 19% and Asia Pacific 20%, with Japan the largest contributor to member growth after the World Baseball Classic drew 31.4 million viewers.
Shares closed at $77.65 on July 2, up 4.66% on the day and 9.52% over the prior week. The stock has gained 703% over the past decade.
Full-year 2026 revenue guidance was reaffirmed at $50.7 billion to $51.7 billion, implying 12% to 14% growth. Operating margin is targeted at 31.5%, up from 29.5% in 2025, and free cash flow guidance was raised to approximately $12.5 billion from $11 billion.
The advertising business is on track to roughly double to $3 billion in 2026, with the advertiser base up 70% year over year to more than 4,000 clients. The ad-supported tier drove over 60% of Q1 sign-ups in ads markets. Netflix ended 2025 with more than 325 million paid members and management estimates it captures only about 7% of an addressable revenue pool worth $670 billion.
Buybacks resumed after the Warner Bros. deal collapsed. Netflix repurchased 13.5 million shares for $1.3 billion in Q1 and has $6.8 billion of authorization remaining.
Wall Street analysts have 37 Buy or Strong Buy ratings, 13 Hold and zero Sells, with a consensus price target of $114.15.
The $327 billion valuation comes after a 39.57% stock decline over the past year, a gap between business performance and share price that bulls see as an opportunity. The next test arrives July 16, when Netflix reports Q2 2026 earnings after market close. Management has guided for revenue of approximately $12.574 billion and an operating margin of 32.6%. Hit those marks, and the current price-to-earnings multiple of 23 times trailing and 23 times forward could prove cheap.
This article is for informational purposes only and does not constitute investment advice.
