Netflix Outpaces Disney with Strong Cash Flow While Disney Focuses on Capital Growth

Netflix reported first‑quarter 2026 revenue of $12.25 billion, up 16.19% year‑over‑year, and generated free cash flow of $5.09 billion while spending only $196.1 million on capital expenditures. The advertising tier accounted for more than 60% of new sign‑ups in ad‑supported markets, and the advertiser base grew 70% to over 4,000 clients. The quarter was also boosted by a $2.8 billion termination fee from a Warner Bros. agreement, but the company’s operating momentum remained strong.

Disney’s fiscal second quarter 2026 delivered revenue of $25.17 billion, a 6.55% increase, with adjusted earnings per share of $1.57, beating the $1.4955 consensus. Entertainment streaming operating income rose 88% to $582 million, achieving a 10.6% margin for the first time. The Experiences segment set a quarterly record of $9.49 billion, though the company’s capital expenditures reached $1.97 billion and net income fell 24.73% year‑over‑year.

Business Driver

Netflix

Quarterly capex: $196 million

FY operating margin target: 31.5%

Main growth driver: Ads and price increases

Disney

Quarterly capex: $1.97 billion

FY operating margin target (SVOD): 10%

Main growth driver: Parks and streaming profitability inflection

Netflix repurchased 13.5 million shares for $1.3 billion, leaving $6.8 billion authorized, and raised its 2026 free cash‑flow guidance to roughly $12.5 billion. The Japanese market was a highlight, with the World Baseball Classic becoming the most‑watched Netflix program in that country. Disney pursued a different strategy, acquiring a 10% non‑controlling interest in ESPN through the NFL Network, merging Hulu Live TV into Fubo (70% Disney ownership), and launching the Disney Adventure cruise in Singapore. Disney’s fiscal 2025 capex rose 48% to $8.02 billion, reflecting its heavy investment in parks, cruises, and sports content. Sports operating income is projected to decline about 14% year‑over‑year in the third quarter due to higher programming costs.

Both companies face a macro environment of sticky inflation. Disney’s per‑capita parks attendance grew 5% domestically, but higher gasoline spending—$552.8 billion in May 2026 versus $415.7 billion in January—could pressure discretionary travel. Meanwhile, recreation services spending hit a record $862.3 billion in May 2026, favoring home‑based entertainment. Netflix’s content amortization is expected to peak in the second quarter of 2026, positioning the firm for margin expansion in the latter half of the year.

Netflix holds a clear advantage in cash generation and capital efficiency, with a 31.5% operating‑margin target versus Disney’s modest 10.6% streaming margin. Although Netflix’s stock is down 21% year‑to‑date, reflecting tougher growth expectations, its asset‑light model provides a more insulated cash story. Disney offers a diversified portfolio that includes parks, sports, and streaming but requires substantial capital to fund growth. Investors seeking pure streaming play favor Netflix, while those desiring broader entertainment exposure may prefer Disney’s mix of assets.

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