NFLX · Forward model · Bear case
The Bear case, 20 quarters out
Each segment is projected from its own operating driver, rolled up into consolidated cash flow, and discounted back to a fair value per share. The assumptions below are editable — change them and every number on this page moves with them.
Netflix reports ONE operating segment and FOUR regional revenue lines: UCAN, EMEA, LATAM and APAC. This model carries exactly those four. Every historical point is copied as reported - 2024 Q2 through 2025 Q2 from the Q2 2025 Exhibit 99.1, 2025 Q3 through 2026 Q2 from the Q2 2026 Exhibit 99.1 - and no quarter is estimated. The four lines sum to consolidated revenue within $1M of letter rounding in all nine quarters, so there is no plug line. What is deliberately NOT modelled: advertising, guided to approximately $3B for 2026 but never disclosed as a revenue line, by region or by quarter, and already inside these four numbers - a separate ads vertical would double count; any subscribers x ARPU decomposition, because Netflix stopped publishing quarterly paid memberships and ARM after 2024 Q4; and any regional profitability split, because no cost, operating income or content spend is disclosed by region. Segment EBITDA here is pre-corporate-overhead: 38.2% vertical margin less 4.0% overhead is the consolidated 34.2%, which is the reported 33.4% operating margin plus $100.5M of property D&A. Capex intensity of 6.6% is purchases of property and equipment (1.7% of revenue) PLUS cash content spend in excess of content amortisation ($4,928M less $4,311M); content amortisation itself stays inside operating expense exactly as Netflix reports it and is not subtracted twice. Tax 16.4% is Q2's effective rate - Q1's 19.3% is distorted by the WBD fee. 2026 Q1 EPS of $1.23 and net income of $5,283M contain that $2.8B termination fee and are not a run rate; the merger was terminated on 27 February 2026, so there is no acquired revenue or library to model. Shares are held flat at the 4,261.3M diluted count even though the buyback removed about 2.0% of the count year over year and $27.1B of authorisation remains - Netflix gives no share-count guidance, so per-share outcomes here are conservative. One known tension: flat per-region sequential rates land FY2026 at about $50.84B, roughly 0.3% under the low end of the guided $51.0-$51.4B, because the guidance midpoint implies a Q4 sequential step of about +5% that a constant rate does not reproduce; Q3 alone lands at $12,867M against the $12,860M guide. netCash is cash $9,099M plus short-term investments $29M less short-term debt $2,484M less long-term debt $11,826M, i.e. net debt of $5.18B. Reference price is the 2026-08-24 close from the house capture; the local profile price of $72.88 is stale.
Growth decelerates faster than price can offset. Reported growth has fallen from +17.6% in Q4 2025 to +16.2% in Q1 2026 to +13.4% in Q2, with Q3 guided to +11.7%, and UCAN - 43% of revenue - is already at +10%. This case assumes the price lever gets harder each cycle and that the FY2026 exit rate is the ceiling rather than a trough, with margin expansion stalling short of the guided glide. What it does NOT assume is a revenue decline, a margin reversal, or falling engagement: view hours grew about 2% in H1 2026 against 1.5% in 2025.
Latest: $14.97B (2031Q2E)
| Period | Value |
|---|---|
| 2024Q2 | $9.56B |
| 2024Q3 | $9.82B |
| 2024Q4 | $10.25B |
| 2025Q1 | $10.54B |
| 2025Q2 | $11.08B |
| 2025Q3 | $11.51B |
| 2025Q4 | $12.05B |
| 2026Q1 | $12.25B |
| 2026Q2 | $12.56B |
| 2026Q3E | $12.79B |
| 2026Q4E | $13.00B |
| 2027Q1E | $13.20B |
| 2027Q2E | $13.38B |
| 2027Q3E | $13.54B |
| 2027Q4E | $13.70B |
| 2028Q1E | $13.84B |
| 2028Q2E | $13.97B |
| 2028Q3E | $14.09B |
| 2028Q4E | $14.20B |
| 2029Q1E | $14.30B |
| 2029Q2E | $14.40B |
| 2029Q3E | $14.49B |
| 2029Q4E | $14.57B |
| 2030Q1E | $14.65B |
| 2030Q2E | $14.72B |
| 2030Q3E | $14.79B |
| 2030Q4E | $14.85B |
| 2031Q1E | $14.91B |
| 2031Q2E | $14.97B |
What drives each segment
UCAN
Growth pathUnited States and Canada. $5,432M in the basis quarter, 43% of company revenue, +10% year over year - the slowest print in the nine-quarter history. The most penetrated region and the one where price, not membership count, is now the lever: the letter says Q2 carries only a partial-quarter effect from the recent US price change, so H2 still has pricing to collect. With no quarterly membership or ARM series after 2024 Q4, the driver is sequential growth on the disclosed regional line.
Latest: $6.18B (2031Q2E)
| Period | Value |
|---|---|
| 2024Q2 | $4.30B |
| 2024Q3 | $4.32B |
| 2024Q4 | $4.52B |
| 2025Q1 | $4.62B |
| 2025Q2 | $4.93B |
| 2025Q3 | $5.07B |
| 2025Q4 | $5.34B |
| 2026Q1 | $5.25B |
| 2026Q2 | $5.43B |
| 2026Q3E | $5.51B |
| 2026Q4E | $5.59B |
| 2027Q1E | $5.65B |
| 2027Q2E | $5.72B |
| 2027Q3E | $5.77B |
| 2027Q4E | $5.82B |
| 2028Q1E | $5.87B |
| 2028Q2E | $5.91B |
| 2028Q3E | $5.95B |
| 2028Q4E | $5.98B |
| 2029Q1E | $6.01B |
| 2029Q2E | $6.04B |
| 2029Q3E | $6.06B |
| 2029Q4E | $6.09B |
| 2030Q1E | $6.11B |
| 2030Q2E | $6.13B |
| 2030Q3E | $6.14B |
| 2030Q4E | $6.16B |
| 2031Q1E | $6.17B |
| 2031Q2E | $6.18B |
Assumptions & reasoning
- Capex intensity means purchases of property and equipment plus cash content spend in EXCESS of content amortisation. Content amortisation stays inside operating expense, exactly as Netflix reports it; subtracting it again as capex would double count the largest cost in the business.
- EBITDA margin is pre-corporate-overhead. 38.2% here less 4.0% corporate overhead is the consolidated 34.2%, which is the reported 33.4% operating margin plus property D&A of $100.5M. Netflix discloses no operating profit by region, so this is the company figure applied to the region.
- Advertising is guided to roughly $3B for 2026 and is already inside this number. It is not broken out here because Netflix discloses no ads revenue line, no regional ads split and no quarterly ads series.
- Terminal margin 41% is the company terminal, carried by the most mature region. Management moved full-year margin from 29.5% to a guided 31.5%; the 0.08 glide keeps roughly that 200bp-a-year pace and then slows.
EMEA
Growth pathEurope, Middle East and Africa. $4,034M in the basis quarter, the first time EMEA has passed $4.0B in a quarter, +14% year over year but only +11% F/X neutral - about three points of the printed growth is currency. Sequentially the softest region in Q2 at +0.9%, with local broadcaster partnerships such as the TF1 tie-up in France as the new distribution lever. Driver is sequential growth on the disclosed regional line.
Latest: $4.82B (2031Q2E)
| Period | Value |
|---|---|
| 2024Q2 | $3.01B |
| 2024Q3 | $3.13B |
| 2024Q4 | $3.29B |
| 2025Q1 | $3.40B |
| 2025Q2 | $3.54B |
| 2025Q3 | $3.70B |
| 2025Q4 | $3.87B |
| 2026Q1 | $4.00B |
| 2026Q2 | $4.03B |
| 2026Q3E | $4.11B |
| 2026Q4E | $4.17B |
| 2027Q1E | $4.23B |
| 2027Q2E | $4.29B |
| 2027Q3E | $4.35B |
| 2027Q4E | $4.39B |
| 2028Q1E | $4.44B |
| 2028Q2E | $4.48B |
| 2028Q3E | $4.52B |
| 2028Q4E | $4.56B |
| 2029Q1E | $4.59B |
| 2029Q2E | $4.62B |
| 2029Q3E | $4.65B |
| 2029Q4E | $4.68B |
| 2030Q1E | $4.71B |
| 2030Q2E | $4.73B |
| 2030Q3E | $4.76B |
| 2030Q4E | $4.78B |
| 2031Q1E | $4.80B |
| 2031Q2E | $4.82B |
Assumptions & reasoning
- Capex intensity means purchases of property and equipment plus cash content spend in EXCESS of content amortisation. Content amortisation stays inside operating expense, exactly as Netflix reports it, and is not subtracted a second time here.
- EBITDA margin is the consolidated pre-G&A figure applied to the region. Netflix is a single operating segment and publishes no regional cost or operating income, so a differentiated EMEA margin would be manufactured.
- Reported +14% against +11% F/X neutral means roughly three points of this line's growth is currency. The opening sequential rate is set below the reported trend precisely because that gap is not a durable driver.
- Advertising in the ads-enabled EMEA markets is inside this number. It is guided only as a company-wide ~$3B for 2026 and never by region, so it cannot honestly be split out.
LATAM
Growth pathLatin America. $1,584M in the basis quarter, +21% year over year reported and +16% F/X neutral - the fastest reported grower and the strongest sequential step at +5.8%. Currency has flipped from a heavy headwind (2024 Q2: +12% reported revenue against +24% F/X-neutral ARM growth, the only constant-currency figure Netflix disclosed for the region) to a tailwind, which is the single largest reason to treat the printed rate as unrepeatable. Driver is sequential growth on the disclosed regional line.
Latest: $1.97B (2031Q2E)
| Period | Value |
|---|---|
| 2024Q2 | $1.20B |
| 2024Q3 | $1.24B |
| 2024Q4 | $1.23B |
| 2025Q1 | $1.26B |
| 2025Q2 | $1.31B |
| 2025Q3 | $1.37B |
| 2025Q4 | $1.42B |
| 2026Q1 | $1.50B |
| 2026Q2 | $1.58B |
| 2026Q3E | $1.62B |
| 2026Q4E | $1.66B |
| 2027Q1E | $1.69B |
| 2027Q2E | $1.72B |
| 2027Q3E | $1.74B |
| 2027Q4E | $1.77B |
| 2028Q1E | $1.79B |
| 2028Q2E | $1.81B |
| 2028Q3E | $1.83B |
| 2028Q4E | $1.85B |
| 2029Q1E | $1.86B |
| 2029Q2E | $1.88B |
| 2029Q3E | $1.89B |
| 2029Q4E | $1.91B |
| 2030Q1E | $1.92B |
| 2030Q2E | $1.93B |
| 2030Q3E | $1.94B |
| 2030Q4E | $1.95B |
| 2031Q1E | $1.96B |
| 2031Q2E | $1.97B |
Assumptions & reasoning
- Capex intensity means purchases of property and equipment plus cash content spend in EXCESS of content amortisation, which was $4,928M against $4,311M of amortisation in Q2 - a 1.14x ratio against the ~1.1x full-year guide.
- Terminal margin sits two points under the company terminal because this is the lowest-price region. That two-point haircut is judgement, not disclosure: Netflix publishes no operating profit by region at all.
- The currency effect here reversed direction inside two years: 2024 Q2 printed +12% reported revenue against +24% F/X-neutral ARM growth, 2026 Q2 prints +21% reported against +16% F/X neutral. Currency is doing work in both directions.
- Advertising in the ads-enabled LATAM markets is inside this number and is not separable. The only published ads figure is a company-wide approximately $3B for 2026.
APAC
Growth pathAsia-Pacific. $1,510M in the basis quarter, +16% year over year reported and +18% F/X neutral - the only region where the currency effect runs against the print. Sequentially flat in Q2 at +0.1% after four strong quarters, with Japanese and Korean title strength and a low-cost first-month test in Japan the visible levers. The least penetrated of the four regions, so it carries the highest terminal rate. Driver is sequential growth on the disclosed regional line.
Latest: $2.00B (2031Q2E)
| Period | Value |
|---|---|
| 2024Q2 | $1.05B |
| 2024Q3 | $1.13B |
| 2024Q4 | $1.21B |
| 2025Q1 | $1.26B |
| 2025Q2 | $1.30B |
| 2025Q3 | $1.37B |
| 2025Q4 | $1.42B |
| 2026Q1 | $1.51B |
| 2026Q2 | $1.51B |
| 2026Q3E | $1.55B |
| 2026Q4E | $1.59B |
| 2027Q1E | $1.62B |
| 2027Q2E | $1.65B |
| 2027Q3E | $1.68B |
| 2027Q4E | $1.71B |
| 2028Q1E | $1.74B |
| 2028Q2E | $1.77B |
| 2028Q3E | $1.79B |
| 2028Q4E | $1.81B |
| 2029Q1E | $1.84B |
| 2029Q2E | $1.86B |
| 2029Q3E | $1.88B |
| 2029Q4E | $1.90B |
| 2030Q1E | $1.92B |
| 2030Q2E | $1.93B |
| 2030Q3E | $1.95B |
| 2030Q4E | $1.97B |
| 2031Q1E | $1.98B |
| 2031Q2E | $2.00B |
Assumptions & reasoning
- Capex intensity means purchases of property and equipment plus cash content spend in EXCESS of content amortisation. Content amortisation remains an operating expense here, as Netflix reports it, and is not double counted as capital spending.
- Terminal margin is two points under the company terminal on the grounds that this is the lowest-ARM region. No regional margin is disclosed, so the haircut is deliberately small and flagged as judgement.
- This is the only region where F/X-neutral growth (+18%) exceeds reported growth (+16%), the reverse of LATAM. A stronger dollar would flatter this line's underlying performance rather than the print.
- Netflix stopped publishing quarterly paid memberships and ARM after 2024 Q4 and cut the What We Watched engagement report to annual from 2027, so neither subscribers nor view hours can drive this line.
Where each case comes from
Bull case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the Bull column is what happens if they are taken at face value.
Netflix Q2 2026 shareholder letter, 16 July 2026
- Jul 16, 2026 We continue to anticipate an operating margin of 31.5% for 2026 both on a reported basis and based on F/X rates as of January 1, 2026 vs. 29.5% in 2025.
- Jul 16, 2026 We project an operating margin of 33.2% compared with 28.2% in the year ago quarter.
- Jul 16, 2026 we continue to expect content amortization to grow slower in the second half of the year and to increase ~10% for 2026
Ads flywheel case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the Ads flywheel column is what happens if they are taken at face value.
Netflix Q2 2026 shareholder letter and earnings interview, 16 July 2026
From cash flow to fair value
| Present value of free cash flow, 20 quarters | $50.51B |
| Terminal-year revenue | $59.53B |
| Terminal-year EBITDA | $20.23B |
| Exit multiple, on revenue | 4.0x |
| Terminal value | $238.11B |
| Discounted at 10.5% a year, terminal value becomes | $144.53B |
| Enterprise value | $195.04B |
| Net cash | -$5.18B |
| Equity value | $189.86B |
| Shares | 4.26B |
| Fair value per share | $44.55 |
| Against the current price of $79.84 | -44% |
5x the terminal year's revenue. Today the equity is about $341B at $80.01 on 4,261.3M diluted shares, an EV of about $346B after $5.18B of net debt, or 7.2x trailing revenue of $48.37B and about 30x clean trailing EPS of ~$2.66 once the WBD termination fee is removed. The exit is a de-rate, and deliberately: a business growing 4-6% a year with a 40%-ish pre-overhead margin is a mature subscription compounder, not a 13% grower. There is no clean peer - Disney and Warner Bros. Discovery carry legacy linear assets and Spotify has a fraction of the margin - so the exit multiple is judgement rather than a comp. Move it before anything else: at 4x the answer is in the mid-40s, at 6x it clears the high 80s. The r40 analyst block shows a Buy consensus with a $94.04 average target across 51 analysts on a $70-$135 range, above this base case, which is what a higher terminal multiple buys you. Discount rate is 9%: cash-generative and lightly levered, but growth is decelerating and content spend is a standing obligation.
Read the other way round: at $79.84 the market is paying 8.2x terminal-year revenue, holding every other assumption on this page fixed. That is the number to argue about.
The projected path
| Quarter | UCAN | EMEA | LATAM | APAC | Revenue | YoY | EBITDA | Capex | FCF | R40 | PV of FCF |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2026 Q3E | $5.51B | $4.11B | $1.62B | $1.55B | $12.79B | +11% | $4.14B | $824M | $2.77B | +33 | $2.71B |
| 2026 Q4E | $5.59B | $4.17B | $1.66B | $1.59B | $13.00B | +8% | $4.23B | $819M | $2.85B | +30 | $2.71B |
| 2027 Q1E | $5.65B | $4.23B | $1.69B | $1.62B | $13.20B | +8% | $4.32B | $814M | $2.93B | +30 | $2.72B |
| 2027 Q2E | $5.72B | $4.29B | $1.72B | $1.65B | $13.38B | +7% | $4.39B | $809M | $3.00B | +29 | $2.71B |
| 2027 Q3E | $5.77B | $4.35B | $1.74B | $1.68B | $13.54B | +6% | $4.47B | $805M | $3.06B | +28 | $2.70B |
| 2027 Q4E | $5.82B | $4.39B | $1.77B | $1.71B | $13.70B | +5% | $4.53B | $801M | $3.12B | +28 | $2.69B |
| 2028 Q1E | $5.87B | $4.44B | $1.79B | $1.74B | $13.84B | +5% | $4.60B | $798M | $3.18B | +28 | $2.67B |
| 2028 Q2E | $5.91B | $4.48B | $1.81B | $1.77B | $13.97B | +4% | $4.65B | $795M | $3.23B | +28 | $2.64B |
| 2028 Q3E | $5.95B | $4.52B | $1.83B | $1.79B | $14.09B | +4% | $4.71B | $792M | $3.27B | +27 | $2.61B |
| 2028 Q4E | $5.98B | $4.56B | $1.85B | $1.81B | $14.20B | +4% | $4.76B | $789M | $3.32B | +27 | $2.58B |
| 2029 Q1E | $6.01B | $4.59B | $1.86B | $1.84B | $14.30B | +3% | $4.80B | $787M | $3.36B | +27 | $2.55B |
| 2029 Q2E | $6.04B | $4.62B | $1.88B | $1.86B | $14.40B | +3% | $4.84B | $785M | $3.39B | +27 | $2.52B |
| 2029 Q3E | $6.06B | $4.65B | $1.89B | $1.88B | $14.49B | +3% | $4.88B | $783M | $3.43B | +26 | $2.48B |
| 2029 Q4E | $6.09B | $4.68B | $1.91B | $1.90B | $14.57B | +3% | $4.92B | $782M | $3.46B | +26 | $2.44B |
| 2030 Q1E | $6.11B | $4.71B | $1.92B | $1.92B | $14.65B | +2% | $4.96B | $781M | $3.49B | +26 | $2.40B |
| 2030 Q2E | $6.13B | $4.73B | $1.93B | $1.93B | $14.72B | +2% | $4.99B | $780M | $3.52B | +26 | $2.36B |
| 2030 Q3E | $6.14B | $4.76B | $1.94B | $1.95B | $14.79B | +2% | $5.02B | $779M | $3.54B | +26 | $2.32B |
| 2030 Q4E | $6.16B | $4.78B | $1.95B | $1.97B | $14.85B | +2% | $5.05B | $778M | $3.57B | +26 | $2.28B |
| 2031 Q1E | $6.17B | $4.80B | $1.96B | $1.98B | $14.91B | +2% | $5.07B | $778M | $3.59B | +26 | $2.23B |
| 2031 Q2E | $6.18B | $4.82B | $1.97B | $2.00B | $14.97B | +2% | $5.10B | $778M | $3.61B | +26 | $2.19B |
Every row is projected. A year-over-year change is shown only where the quarter it compares against exists — an em dash means there is no comparable quarter, not a flat year.
Model revisions
Assumptions are marked to reality as each quarter prints. Every change is appended here, with the fair value the model produced at the time, so the model's own history stays visible.
| Date | Changed | Fair value then | Note |
|---|---|---|---|
| 2026-08-27 | all | $65.83 | Initial model. Four verticals on the disclosed UCAN/EMEA/LATAM/APAC revenue lines, nine reported quarters each, basis the June 2026 quarter at $12,560M. Opening sequential rates are calibrated so Q3 2026 lands at $12,867M against the $12,860M guide; FY2026 comes out at about $50.84B, marginally under the guided $51.0-$51.4B because a constant sequential rate does not reproduce the implied Q4 step. |