Ackman’s Return to Netflix Signals Renewed Confidence After 50% Pullback

Pershing Square Returns as Netflix’s Economics Strengthen

Netflix (NFLX) shares climbed more than 5% Thursday after Bill Ackman’s Pershing Square disclosed a new investment in the streaming company, marking a return four years after the firm exited its previous position at a loss.

The investment totals 3.15 million shares and represents 4.9% of Pershing Square’s portfolio. The decision comes after Netflix fell roughly 50% from its June 2025 high, reducing its forward earnings multiple from more than 40 times to about 21 times, according to Pershing.

Key Points

• Pershing Square disclosed a 3.15 million-share Netflix position representing 4.9% of its portfolio, returning to the company four years after selling its previous stake.
• Pershing argues Netflix has effectively won the streaming wars, with more than 325 million subscribers and operating margins expanding from 21% in 2021 to roughly 31.5%.
• Netflix shares gained more than 5% Thursday as Ackman’s investment drew attention to the company’s stronger cash generation, advertising growth and lower valuation following a roughly 50% decline from its 2025 high.

Ackman Returns to a Different Netflix

Pershing Square’s return is notable because of how quickly Ackman abandoned his previous Netflix investment.

The firm bought Netflix during the 2022 selloff before exiting months later at a loss after the company reported declining subscribers. Four years later, Pershing argues that the investment case has changed considerably.

The fund now believes Netflix has “effectively won the streaming wars,” pointing to more than 325 million subscribers and a scale advantage that allows the company to spread content costs across a much larger audience.

The financial profile has also changed. Netflix’s operating margin has increased from 21% in 2021 to roughly 31.5%, while cash content spending has grown at only about 2% annually over the same period.

Pershing estimates that Netflix now converts roughly 90% of earnings into free cash flow. It also expects the company to maintain double-digit revenue growth, with earnings compounding close to 20% annually.

Recent results provided additional support for the operating trends highlighted by Pershing. Second-quarter revenue increased 13.4% to $12.56 billion, while operating margin reached 33.4%. Management expects 2026 revenue of $51 billion to $51.4 billion and a full-year operating margin of 31.5%.

Why Did Netflix Stock Rally on Ackman’s Investment?

The disclosure provided Netflix with a high-profile vote of confidence after a steep decline in its share price.

Netflix had fallen roughly 50% from its June 2025 high, pushing its forward earnings valuation from more than 40 times to approximately 21 times, according to Pershing.

That combination of a lower valuation and improving business economics sits at the center of Ackman’s renewed investment.

Pershing expects revenue to compound at a double-digit rate while content costs grow more slowly than revenue, supporting further operating margin expansion. The fund described Netflix’s current valuation as a “substantial discount” given its view of the company’s business quality and prospective earnings growth.

Netflix shares gained more than 5% Thursday following disclosure of the new position.

The investment is also meaningful within Pershing Square’s concentrated portfolio. Netflix represents 4.9% of the portfolio, alongside holdings including Microsoft (MSFT), Meta Platforms (META) and Uber Technologies (UBER).

Advertising and Live Sports Add New Growth Engines

Netflix’s business is also expanding beyond its traditional subscription model.

Advertising revenue is approaching $3 billion this year, providing another source of monetization alongside subscriptions. At the same time, Netflix is selectively expanding its live programming strategy.

The company’s 2026 MLB schedule includes three events, culminating with the Field of Dreams game between the Minnesota Twins and Philadelphia Phillies. Its Yankees-Giants Opening Night broadcast averaged 3 million U.S. viewers.

Live programming represents just over 5% of Netflix’s expected 2026 content spending and approximately 1% of viewing hours. Yet live events accounted for six of the company’s 10 largest new-member signup days during the past five years.

That relationship gives selective live programming significance beyond total viewing time, particularly as Netflix expands its advertising business.

More live sports are scheduled for 2026, including NFL programming, while WWE Raw remains part of the company’s recurring live offering.

The financial question is whether Netflix can continue expanding those offerings while maintaining its strong operating economics. Management currently expects third-quarter revenue growth of approximately 12% and an operating margin of 33.2%.

What It Means for Investors

Ackman’s return puts the focus on how significantly Netflix has changed since Pershing Square exited the company in 2022.

The new investment is not simply based on a lower share price. Pershing’s thesis centers on Netflix’s scale, expanding operating margins, stronger free cash flow conversion and additional revenue opportunities from advertising.

The roughly 50% decline from Netflix’s 2025 high has also materially changed its valuation. According to Pershing, the stock moved from more than 40 times forward earnings to approximately 21 times.

Meanwhile, Netflix continues to report double-digit revenue growth. Its second-quarter operating margin reached 33.4%, compared with 21% in 2021, while advertising is becoming a larger part of the business.

The combination helps explain why Pershing Square is willing to return to a company it previously exited at a loss.

Conclusion

Bill Ackman’s renewed Netflix investment comes at a very different point in the company’s development than his original 2022 position.

Netflix now has more than 325 million subscribers, significantly higher operating margins, stronger free cash flow conversion and an advertising business approaching $3 billion in annual revenue. At the same time, a roughly 50% decline from the stock’s 2025 peak has sharply reduced its valuation.

Thursday’s rally reflects renewed investor attention to that combination. Pershing Square’s return does not change Netflix’s fundamentals, but it highlights how the relationship between the company’s growth, profitability and valuation has shifted following the stock’s steep decline.

FAQs

Why did Netflix stock rise Thursday?

Netflix shares gained more than 5% after Bill Ackman’s Pershing Square disclosed a new 3.15 million-share position in the company, marking its return to Netflix four years after exiting its previous investment.

How large is Pershing Square’s new Netflix investment?

Pershing Square disclosed 3.15 million Netflix shares, representing 4.9% of its portfolio.

Why did Bill Ackman return to Netflix?

Pershing Square points to Netflix’s scale, double-digit revenue growth, expanding operating margins, stronger free cash flow conversion and a lower valuation following the stock’s roughly 50% decline from its June 2025 high.

How is Netflix’s profitability changing?

Netflix’s operating margin has increased from 21% in 2021 to roughly 31.5%, while its second-quarter operating margin reached 33.4%. Pershing estimates the company now converts roughly 90% of earnings into free cash flow.

How important is advertising to Netflix?

Netflix expects advertising revenue to approach $3 billion this year. The business provides an additional revenue source alongside subscriptions as the company also expands selective live programming.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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