Netflix (NASDAQ: NFLX | NFLX Price Prediction) and Spotify (NYSE: SPOT) both closed the books on Q1 2026, and the reports tell two very different stories about scaled subscription media.
Netflix beat on revenue but missed on earnings while collecting a fat breakup fee. Spotify crushed EPS yet spooked investors with soft forward guidance. Same industry, opposite reactions.
Ad Tiers Carry Netflix. Premium Carries Spotify.
Netflix pulled in $12.25 billion in revenue, up 16.19% year over year, with EPS of $1.23 versus the $1.345 estimate. The miss looks worse than it is. A $2.8 billion Warner Bros. termination fee distorted the bottom line, and management raised free cash flow guidance to roughly $12.5 billion.
The real engine is advertising. The ad-supported tier drove over 60% of Q1 sign-ups in ads-enabled countries, and the advertiser roster grew 70% year over year to more than 4,000 clients, on pace for $3 billion in ad revenue this year.
Spotify came in almost the opposite way. Revenue of $4.53 billion nudged past estimates, but EPS of $3.45 versus $2.95 was the headline. MAUs hit 761 million (+12%) and Premium subscribers reached 293 million (+9%).
Premium is the profit engine: gross margin expanded to 35% from 34%, helped by a €0.42 ARPU lift from price hikes. The blemish: Ad-Supported revenue fell 5% and its gross margin slipped to 13%.
One Widens the Bet. The Other Cleans House.
Netflix is stretching into everything. It acquired InterPositive, Ben Affleck’s GenAI filmmaking tools company, launched the Netflix Playground kids gaming app, and is leaning into live sports (a Tyson Fury vs. Anthony Joshua fight) and video podcasts. Japan is a bright spot after the World Baseball Classic became the most-watched Netflix program ever in the country.
| Lens | Netflix | Spotify |
| Core Bet | Ad-supported streaming plus live events | Premium audio at higher ARPU |
| Operating Margin | 31.5% target for 2026 | ~16% Q1 |
| Key Vulnerability | Content amortization, ad concentration | €410M MLC audiobook royalty lawsuit |
Spotify took the discipline route, settling its $1.5 billion Exchangeable Notes in March and shipping AI features like Prompted Playlist, Taste Profile, and SongDNA, still mostly in beta.
The Next Test Is Whether the Stock Follows the Business
Netflix shares tell a strange story. NFLX is down 18.75% year to date and 40.93% over one year, closing at $76.18, despite raised guidance. Reddit sentiment turned sharply bearish this week, driven by a wallstreetbets thread about Netflix’s top shows losing 30-70% of their audience between seasons. Composite sentiment sits at 41.68, down 30.79 over 30 days.
Spotify, meanwhile, trades at $493.95, up 5.09% since its April earnings window, with a composite sentiment of 73.65 (bullish). I will be watching whether Netflix’s ad revenue actually hits $3 billion and whether Spotify can reverse the ad-tier slide before the MLC verdict lands.
Why I Lean Spotify, Cautiously
For me, Spotify looks like the cleaner story right now. Premium ARPU is rising, debt is off the books, and the buyback continues with $1.024 billion remaining. It is not cheap at roughly 46x earnings, and the ad segment is a real problem.
Netflix is arguably the better business. Higher margins, stronger cash flow, and a genuine ad ramp. Yet retention concerns and a sliding share price make me hesitate. On a defensive-scale lens, Netflix at these levels screens as interesting. On a momentum-with-clean-balance-sheet lens, Spotify screens better. The audience retention question remains the key overhang for Netflix from here.
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