Here is the situation: the same week Bill Ackman disclosed a new 3.15 million-share stake in Netflix, Tiger Global Management filed a 13F showing it had exited its entire Netflix position. Same stock, same quarter, opposite decisions from two institutions that both know the business well. That kind of divergence is not noise. It is the investment debate in its purest form, and it is exactly why Netflix deserves close attention right now.
Why This Stock Matters Now
Netflix’s stock closed at a record high of $133.91 on June 30, 2025. As of this week, shares near $80 represent a decline of just over 40 percent from that peak. The stock entered 2026 trading at roughly $90, touched a yearly high near $107 in April, then fell to a 52-week low near $65 in the weeks following its Q2 earnings report. It has since recovered to the $78 range, leaving investors with a simple question: is this a fundamentally strong business that the market has repriced too aggressively, or a growth story that has genuinely run its course?
On August 14, 2026, Pershing Square Capital Management, led by Bill Ackman, disclosed a new stake in Netflix of 3.15 million shares, which represents approximately 4.9% of the fund’s portfolio. This marks Ackman’s return to Netflix after selling off his stake four years ago, resulting in a reported loss of more than $400 million. The re-entry is notable precisely because of that history. Ackman is not someone who forgets a painful exit.
The Investment Thesis
Ackman’s core argument is that Netflix in 2026 is a categorically different business from the one he paid up for in early 2022. This time, he is paying far less for a business growing 13% with expanding margins and an ad business just hitting its stride. Pershing Square purchased shares after Netflix fell roughly 50% from an all-time high, bringing its forward earnings multiple down from 40 times to 21 times, what the fund viewed as a compelling entry point relative to the stock’s historical valuation.
Pershing Square stated that “Netflix has since effectively won the streaming wars” and expects Netflix to compound revenue at a double-digit growth rate, with content costs growing more slowly than revenue, driving continued margin expansion. That is a testable thesis. The evidence for it is stronger than the stock price suggests.
The Business Behind the Stock
Netflix reported Q2 revenue of $12.56 billion, up 13.4% year over year, and net income of $3.4 billion. Operating margin for Q2 came in at 33.4%. Revenue growth is decelerating from the 17.6% pace of late 2025, which is the fact the market is punishing. But context matters: this is not a company squeezing margins by cutting content; it is a company whose revenue base has grown large enough to absorb a roughly $20 billion annual content budget without flinching.
Netflix narrowed its 2026 full-year revenue forecast to $51.0 billion to $51.4 billion. The company expects operating margin to expand by 200 basis points to 31.5%, and analysts expect EPS to grow sharply for the full year. At 25 times forward earnings, the stock is not a screaming bargain, but it is attractively valued relative to its near-term growth.
The number most investors are underweighting is the advertising line. The advertising business is the most underappreciated part of the Netflix story right now. The ad-supported tier, priced at $8.99 in the U.S., represented over 60% of all new sign-ups in ad-supported markets during the first quarter. Netflix has said it is on track to reach $3 billion in advertising revenue in 2026.
Netflix’s ad-supported plan is no longer a small add-on. The company says it now reaches more than 250 million global monthly active viewers, with more than 80% of ad members watching every week. Scale like that changes the conversation with advertisers. Netflix closed its 2026 U.S. upfront in August and has said ad commitments nearly doubled from the prior year.
What Is Changing
Live sports is the second-order catalyst that the market is still not pricing fully into the business. Netflix targets $3 billion in ad revenue by year-end, with live events becoming a bigger part of the mix.
This fall, Netflix will once again have an exclusive window for a Christmas Day NFL doubleheader while expanding its overall footprint to five games during the 2026 season. The league’s first-ever game in Australia in Week 1 will stream on Netflix, and a Thanksgiving Eve matchup is also part of the package.
The content amortization calendar also works in Netflix’s favor in the second half of 2026. Content amortization running heavier in the first half of the year is expected to ease in the second half, pointing toward stronger operating income growth as 2026 progresses. Ackman’s entry in Q2 was not random timing.
Management has been equally direct with its own capital. In Q2 2026, Netflix said it repurchased $4.7 billion of shares, the largest quarterly buyback in the company’s history, and it said it still had about $27 billion of remaining repurchase capacity.
The Risks
The bear case is not frivolous. Tiger Global Management’s Q2 13F filing showed it sold its entire 2.44 million-share Netflix position, valued at about $234.5 million at the end of the first quarter. Tiger Global was buying into other themes with that capital, which tells you something about where that firm sees better risk-adjusted returns in the current market.
Revenue grew by 17.6% in Q4 2025, followed by 16.2% in Q1 2026, and 13.4% in Q2. The deceleration is consistent and sequential. The deceleration that knocked the stock down is the risk that comes with it. If revenue growth keeps stepping down toward single digits, today’s valuation could stop looking like a discount.
Engagement is the other pressure point. Netflix members watched more than 97 billion hours of programming in the first half of 2026, up 2% year over year. That may sound modest, but it came despite major global sports competition for attention. Still, a 2% engagement gain is not the kind of number that justifies premium growth multiples. The advertising strategy is specifically designed to monetize what exists rather than rely on viewer expansion.
Execution risk is real, because live sports rights are expensive, viewing can be seasonal, and Netflix still needs to show that higher content and rights spending translates into steady cash generation. Free cash flow declined to $1.53 billion in Q2 versus $2.27 billion in the year-ago period, though management maintained a roughly $12.5 billion full-year free cash flow target.
What Investors Should Watch Next
Three metrics will determine whether this thesis is unfolding correctly or stalling. First, watch the Q3 advertising revenue figure, due October 20. Any acceleration above expectations reframes the entire margin story for 2027. Second, watch NFL viewership data from the Christmas Day doubleheader in December. Live sports is Netflix’s best lever for ad pricing power, and one breakout broadcast changes what advertisers are willing to pay across the entire platform. Third, monitor member penetration. Paid memberships ended Q1 2026 above 325 million, with penetration remaining under 45% of the addressable household base. That ceiling is still far off.
As of mid-August 2026, 51 analysts cover Netflix, with a consensus target price of $94.04, but at least one analyst rating in that coverage set is a Sell. At the current price near $80, the consensus implies roughly 20% upside before any re-rating from advertising or sports execution.
Bottom Line
Netflix is not the screaming bargain some headlines imply, but it is a business trading at a meaningful discount to both its own history and its forward earnings trajectory. The deceleration is real. So is the $3 billion advertising line that did not exist two years ago, the live sports calendar that will drive pricing power through 2027, and a management team spending $4.7 billion of its own money in one quarter to signal where it thinks the stock belongs. Pershing Square gained 34% in 2025, and over the past eight years has returned about 23% annually, far outpacing the S&P’s roughly 14% annualized gains over that same span. When a fund with that record re-enters a trade that previously cost it more than $400 million, the reasoning behind the decision warrants serious scrutiny. October 20 is the next hard data point. The situation between now and then is the most compelling part of the trade.
