Goldman Sachs maintains Buy on Netflix but lowers target price to $94

Overview

This is a Goldman Sachs review report on Netflix Inc.'s results for the second quarter of 2026. The core conclusion is to maintain the Buy rating while lowering the 12-month target price from $110 to $94. Goldman Sachs believes the company's long-term fundamentals remain supportive, including member and user growth, pricing power, rising revenue from the ad-supported tier, balance between content investment and capital returns, and relatively high M&A barriers. However, near-term market debates around engagement disclosure, inorganic growth allocation, Q3 growth slowdown, and rising investment are still likely to persist.

Core views

Goldman Sachs' main views include: first, Netflix's Q2 results and management commentary show the company remains focused on compounded revenue growth, margin trajectory, and capital allocation; second, first-half 2026 engagement was broadly in line with Goldman Sachs' expectations rather than the sharp decline previously feared by the market; third, growth initiatives such as advertising, live content, and gaming are still progressing, with the advertising business reiterating its 2026 $3bn target; fourth, Q2 operating profit and GAAP EPS were better than prior guidance as well as Goldman Sachs and market expectations, though revenue was slightly weaker; fifth, Q3 revenue and operating profit guidance came in below prior expectations, reflecting a possible sequential slowdown in year-over-year growth while sales and marketing and technology development investment rise; sixth, the target price cut reflects reduced visibility into forward operating performance and free cash flow rather than a reversal of the rating thesis.

Analysis framework

The report uses a framework comparing reported results with Goldman Sachs forecasts, market consensus, and company guidance to assess areas where Q2 revenue, regional revenue, operating margin, free cash flow, and GAAP EPS beat or missed expectations; it also updates earnings forecasts for Q3, FY2026, 2027, and 2028, and combines two valuation methods with equal weighting—EV/GAAP EBITDA and a modified DCF—to derive the 12-month target price.

Methodology notes

• Valuation methodsEV/GAAP EBITDA

  Relative valuation multiple

  Goldman Sachs applies a 20.0x EV/GAAP EBITDA multiple to its NTM+1 estimate, down from 22.5x previously, to reflect reduced visibility into forward operating performance while maintaining an approximately 1.0x relative growth ratio.

• Valuation methodsModified DCF / EV/FCF-SBC

  Cash flow valuation

  Goldman Sachs applies a 21.0x EV/FCF-SBC multiple to its NTM+4 estimate and discounts it back three years at a 12% discount rate; the multiple is down from 24.0x previously due to lower confidence in NFLX's future free cash flow trajectory.

• Factor AnalysisGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factors

  Goldman Sachs' factor profile compares the stock by percentile against the covered equity universe and industry peers across growth, financial returns, valuation multiples, and composite metrics.

• M&A FrameworkM&A Rank

  Potential acquisition probability score

  The report lists NFLX's M&A Rank as 3, representing a low probability, or a 0%-15% potential acquisition probability; this ranking is viewed as not material to the target price.

Asset mapping & comparison

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

• NFLX.US

  Covered name in the report, Netflix Inc. common stock.

  Strengths

  Goldman Sachs is constructive on member growth, pricing power, rising ad-supported revenue, content slate execution, margin expansion, and shareholder returns; Q2 operating profit and GAAP EPS exceeded both Goldman Sachs and market expectations.

  Weaknesses

  Q3 revenue and operating profit guidance came in below prior expectations, while growth investment is rising; engagement trends are stable but still somewhat soft, disclosure frequency has declined, and promotional activity has increased somewhat.

  Comparison

  The report compares NFLX within the Americas Internet coverage universe and uses the GS Factor Profile to assess its growth, financial returns, valuation multiples, and composite factor positioning.

  Risks

  User growth may fall short of expectations, the timing and magnitude of price increases may affect churn, ad-tier execution may be slower than expected, M&A integration and regulatory risks may emerge, and industry competition as well as competition for consumer attention may intensify.

Key data

• RatingBuyThe rating has been Buy since 2026-04-05, and this report maintains that rating.
• Target price$94Lowered from the previous $110; 12-month target price.
• Current price$74.35Price disclosed in the report, with the price date being the 2026-07-16 close.
• Market capitalization$316.8bnListed in the report's Key Data.
• Enterprise value$321.7bnListed in the report's Key Data.
• Q2 total revenue$12.560bnAbout 0.1% below Goldman Sachs' forecast and broadly in line with consensus; up 13.4% year over year.
• Q2 operating profit$4.193bn2.1% above Goldman Sachs' forecast and 1.7% above consensus.
• Q2 GAAP EPS$0.802.1% above Goldman Sachs' forecast and 1.3% above consensus.
• Q3'26 Goldman Sachs revenue forecast$12.87bnLowered from the previous $13.06bn.
• FY2026 Goldman Sachs revenue forecast$51.35bnLowered from the previous $51.66bn.
• FY2026 Goldman Sachs GAAP EPS forecast$3.58Lowered from the previous $3.60.
• 2026 advertising business target$3bnManagement reiterated the advertising revenue target.
• Q2 buybacks~$4.7bnAbout $27.1bn remains under the current buyback authorization.

Impact & implications

The report's investment implication is that NFLX's long-term growth and profit expansion thesis remains intact, so the rating stays positive; however, near-term valuation needs to reflect lower forward visibility, especially with Q3 guidance below expectations, less frequent engagement disclosure, increased promotional activity, and higher growth investment. Investors need to distinguish between long-term compounded growth driven by advertising, content, pricing, and capital returns, and short-term volatility debates around engagement and expense investment.

Risks

• Subscriber growth comes in below Goldman Sachs' estimates.
• The timing and magnitude of price increases may raise churn and pressure operating forecasts.
• The rollout of the ad-supported tier may progress more slowly than expected.
• Integration, execution, and regulatory risks related to M&A.
• Intensifying industry competition affects user growth, returns on original content, and consumer attention.
• Changes in engagement metrics and disclosure frequency may continue to drive market disagreement.
• Rising sales and marketing and technology development investment may pressure near-term margins.

What to watch

• Whether revenue growth re-accelerates in the second half of 2026, especially actual performance after the Q3 guidance.
• Whether the advertising business achieves its planned 2026 $3bn target.
• Whether live content and gaming can continue to drive incremental members and higher engagement.
• Whether operating margin continues to expand amid rising growth investment.
• The pace of buybacks and execution of the remaining $27.1bn authorization.
• Management's subsequent disclosure on engagement, promotional activity, and engagement with content quality.
• Whether the future free cash flow trajectory is sufficient to support a recovery in valuation multiples.