Citizens analyst Matthew Condon expects Netflix Inc
Condon reiterated Netflix with a Market Perform.
Strong Earnings Setup With Pricing-Driven Upside
Condon expects Netflix to report better-than-expected first-quarter of 2026 results, with revenue of about $12.2 billion (~1% above guidance), operating income of $4.1 billion (5% above), and net income of $3.4 billion (5% above), translating to diluted EPS of 80 cents (5% above guidance). In a stronger scenario, he sees revenue reaching $12.7 billion, operating income of $4.5 billion, net income of $3.7 billion, and EPS of 87 cents.
For the full year, this upside case implies revenue of $51.9 billion (1% above guidance), operating income of $16.8 billion (2.5% above consensus), and net income of $14 billion (2.5% above), with EPS rising to $3.25 versus $3.17 consensus.
He highlights recent U.S. price increases as a key driver, estimating a $1.42 monthly uplift for ARM. Assuming 88 million U.S. members and no material churn, this could generate ~$1.1B in incremental revenue and ~8% upside to 2026 EPS.
Engagement Trends Show Competitive Pressure
Condon notes that competition for streaming time remains intense. While total U.S. streaming hours grew 19% year-over-year to 278 billion hours in 2025, Netflix's share declined from 19.9% to 18.2%.
He estimates Netflix's U.S. memberships grew ~11% year-over-year to ~84 million-86 million, but streaming hours grew only ~9%, implying a ~1.9% decline in hours per member.
With 325 million global paid memberships and ~45% penetration of broadband households (~720 million total), he expects future membership growth to moderate to mid-single digits.
He also flags emerging engagement drivers like podcasts, where 13% of Netflix households watched podcast content in the first quarter of 2026, indicating potential to expand usage beyond traditional viewing.
Ads, Costs and Valuation In Focus
Condon sees advertising as a major growth lever, with revenue expected to rise from $1.5 billion in 2025 to ~$3 billion in 2026, accounting for roughly 25% of the company's ~$6 billion in incremental revenue. He points to product improvements like DSP integrations, CAPI tools, and interactive ads as drivers of higher CPMs and fill rates.
On costs, Netflix previously guided to ~10% year-over-year growth in content amortization in 2026, up from ~7% in 2025. However, lower original content output in the first quarter of 2026 - 23 films (lowest since 2017) and 49 series (down from 64) - could influence future updates.
From a valuation standpoint, Condon notes the stock trades at 22.7x 2027 EV/EBITDA, closer to historical averages after re-rating. While he sees the shares as fairly valued for now, he prefers to wait for a more attractive entry point despite Netflix's scale, pricing power, and global distribution advantages.
NFLX Price Action: Netflix shares were down 0.43% at $106.71 at the time of publication on Wednesday, according to Benzinga Pro data.
