Key Takeaways:
- Netflix generated $5.09B in free cash flow on $196M capex in Q1 2026
- Disney spent $1.97B on capex as net income fell 24.73% year over year
- Netflix targets 31.5% operating margin versus Disney's 10.6% SVOD margin
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Netflix prints $5B cash while Disney burns $2B on capex
Netflix Inc. reported Q1 2026 free cash flow of $5.09 billion on just $196.1 million of capital expenditure, while Walt Disney Co. posted $1.97 billion in capex as net income fell 25%, underscoring two diverging business models behind the same streaming label.
"The streaming wars are effectively over and Netflix won, and the numbers back that read," Alex Sirois, a financial writer covering the sector, said. "A 31.5% operating margin target against a Disney SVOD business that just crossed 10.6%."
Netflix booked revenue of $12.25 billion, up 16.19% year over year, though earnings per share of $1.23 missed the $1.345 consensus by 8.55%. The headline cash flow figure was inflated by a $2.80 billion termination fee from the abandoned Warner Bros. Discovery deal. The ad-supported tier captured more than 60% of sign-ups in ads markets, with advertiser count climbing 70% to more than 4,000 clients. The company raised its full-year free cash flow guidance to approximately $12.5 billion from $11 billion and repurchased 13.5 million shares for $1.3 billion in the quarter.
Disney's fiscal second-quarter revenue reached $25.17 billion, up 6.55%, with adjusted EPS of $1.57 beating the $1.4955 consensus. Entertainment SVOD operating income surged 88% to $582 million, hitting a 10.6% margin for the first time. Experiences revenue set a Q2 record at $9.49 billion. But net income fell 24.73% year over year, and fiscal 2025 capex hit $8.02 billion, a 48% jump. Sports operating income is expected to decline roughly 14% year over year in the third quarter on higher programming costs.
The contrast matters as discretionary budgets tighten. Netflix's content amortization growth is expected to peak in the second quarter before decelerating to mid-to-high single-digit growth in the back half of 2026, which should support further margin expansion. Disney faces a different test: whether per capita parks growth, up 5% domestically, holds as consumer spending shifts. Recreation services spending hit $862.3 billion in May 2026, a dataset high that favors at-home entertainment over travel.
Netflix shares trade at $73.78, down 21.31% year to date and within $3 of their 52-week low, while Disney trades near $108. The guidance raise signals Netflix management expects its asset-light model to keep compounding. Investors will watch Netflix's Q2 2026 earnings report on July 16 for operating margin delivery against the 32.6% guide and Disney's fiscal third-quarter print for parks segment trends.
This article is for informational purposes only and does not constitute investment advice.
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