Goldman Reiterates Netflix Buy Rating, Lowers Target Price to $110

Overview

This is a Goldman Sachs Q2 2026 earnings preview report on Netflix Inc. (NFLX.US). The report focuses on the four topics investors are most focused on before the earnings call: advertising expansion, the live events strategy, the short vertical video opportunity, and the expanded share repurchase authorization. Goldman acknowledges that Q2 has near-term user and engagement pressure from seasonal effects, content slate dynamics, and weaker live-event pull-through, but still views Netflix as having an attractive risk-reward due to advertising monetization, content execution, and capital return.

Core views

Core views include: first, advertising is becoming a more important incremental driver of total revenue, with Goldman expecting advertising to contribute about $3bn in 2026, roughly 6% of revenue, and to sustain a five-year CAGR of about 45% from 2025 to 2030. Second, live events have moved from early experimentation to a more structured engagement layer, but Q2’26 event-driven MAU lift was less pronounced than in earlier periods. Third, Netflix’s launch of Clips in vertical short-form video is intended to capture younger users’ short-video consumption habits and lay the groundwork for incremental ad inventory in 2027. Fourth, the expanded buyback authorization could improve EPS leverage, with Goldman assuming the roughly $31.8bn remaining authorization is executed in a roughly linear fashion over the next 2.5 years.

Analysis framework

The report triangulates company guidance, Goldman Sachs forecast models, Sensor Tower app data, Nielsen The Gauge TV share data, content slate statistics, and advertising market and live-event casework to cross-check Netflix’s quarterly operating trend and valuation shifts. The analysis focus is not a single financial forecast but using third-party data to frame key pre-earnings debates: whether user growth is decelerating, whether engagement is under pressure, whether advertising and live events can become a new growth engine, and whether buybacks can improve EPS.

Methodology notes

• Operating metric trackingSensor Tower App MAU and download ranking tracking

  Observes inflection points in subscription user trends through iOS and Android app MAU and market rankings.

  The report uses Sensor Tower data to track Netflix app MAU in major markets, arguing that these data serve as a health check for shifts in national and overall subscription trends.

• Media consumption shareNielsen The Gauge

  Measures streaming and platform competition dynamics through U.S. TV time share.

  The report cites Nielsen data showing U.S. streaming shares continuing to rise in TV consumption, while both YouTube and Netflix gained share over the past 12 months.

• Content and engagement analysisContent slate and Top 10 watch-hour analysis

  Assesses content supply and engagement by breaking down original-title count, watch hours for series/movies, and language categories.

  The report notes that Q2’26 had 124 original titles, down about 17% year over year, and Top 10 total watch hours were down 18% year over year, indicating content base and slate size are putting pressure on engagement.

• Capital return modelingShare buyback scenario analysis

  Estimates future repurchase volume and EPS tailwind using free cash flow and cash-balance assumptions.

  The report incorporates the roughly $31.8bn remaining authorization as linear execution over the next 2.5 years in its base case and discusses potential scenarios of repurchasing about 20%-30% of current market cap over the next five years.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NFLX.US

  Research coverage

  Strengths

  Advertising revenue growth, global pricing power, live events and content ecosystem, buyback authorization, and leadership in streaming.

  Weaknesses

  Q2’26 MAU and watch-time declined year-over-year, original slate shrank year-over-year, and live-event lift remains uneven.

  Comparison

  Across most of the top-20 markets, the Netflix app remains No. 1 in MAU versus streaming peers, except in Japan; in U.S. streaming share growth, YouTube’s contribution is more pronounced.

  Risks

  Slowing user growth, declining engagement, potential advertising ARM dilution, content cadence effects, valuation multiple compression, and uncertainty around live-event return on investment.

Key data

• 12-month target price$110.00Target price lowered from $120 to $110.
• Current price$77.65Price disclosed on the report cover.
• Implied upside41.7%Based on the target price and current price disclosed in the report.
• Advertising revenue forecastAbout $1.5bn in 2025; about $4.5bn in 2027E; about $9.5bn in 2030EGoldman expects advertising to become a more important contributor to total-revenue growth.
• Five-year CAGR for advertising revenueabout 45%Report tables imply approximately 45% five-year CAGR in current forecasts.
• Q2’26 MAU trendGlobal -3% YoY; U.S. -3% YoYBased on Sensor Tower data.
• Q2’26 watch-time trendU.S. -8% YoY; Global -7% YoYThe report sees engagement under year-over-year pressure.
• Original content slate124 original titles, down about 17% YoYQ2’26 slate is smaller than Q2’25.
• Remaining buyback authorizationabout $31.8bnIncludes the additional $25bn authorization after Q1 and prior remaining authorization of about $6.8bn.
• 2026E revenue$51,664.2mnDisclosed in Goldman forecast tables.
• 2026E EPS$3.60Disclosed in Goldman forecast tables.

Impact & implications

For investment implications, the report places weak short-term operating data alongside long-term growth engines. In the short term, continued weakness in MAU, watch time, content slate size, and live-event pull-through could extend investor concerns on competitive positioning and engagement. Over the longer term, advertising layer expansion, commercialization of live events, short-form video ad inventory, and a large repurchase program could improve revenue mix and EPS. Goldman therefore maintains its Buy rating but reflects sector valuation-multiple de-rating through a lower target price.

Risks

• Global and U.S. App MAU both fell about 3% year-over-year in Q2’26, which may intensify market concerns about user growth.
• U.S. and global watch time declined 8% and 7% year-over-year, indicating pressure on engagement.
• Q2’26 original title count was down about 17% year-over-year, and content supply cadence may affect watch time.
• Although live events have long-term potential, Q2’26 did not show as pronounced MAU lift as in earlier periods.
• Advertising ad load in 2026 may still dilute overall ARM, and sustained execution is required for improved advertising monetization.
• The target-price cut reflects risk from a pullback in the growth-to-multiple relationship within the coverage set.

What to watch

• Whether the company confirms in Q2’26 results that user growth and engagement are indeed under pressure as third-party data suggest.
• Whether advertising revenue progresses in line with management’s outlook of roughly doubling year-over-year, and whether the advertising ARM gap narrows.
• Whether second-half original content and live-event slate can again drive user growth and watch time.
• User adoption of vertical short-form Clips, the pace of ad inventory rollout, and young-user engagement.
• The actual execution pace of the roughly $31.8bn remaining buyback authorization and its impact on shares and EPS.
• Changes in Netflix’s U.S. viewing-share position relative to YouTube and other streaming platforms.