The stock market landscape has shifted dramatically over the last decade, transitioning through two remarkably distinct periods. The initial era, spanning from 2015 to 2019, was characterized by the meteoric rise of “FAANG stocks” — Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet). This elite group emerged as the hallmark of success during the mobile and cloud-computing boom.
In more recent years, the spotlight has shifted to the so-called Magnificent 7, which includes Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. This new assembly has become a force to reckon with, driven by fervent optimism surrounding the future profitability of artificial intelligence (AI). However, one notable exit from the elite ranks was Netflix, which failed to make the transition from the FAANG cohort to the Magnificent 7. Its exclusion may not come as a surprise, as Netflix has not been widely recognized as an AI-oriented stock. This, combined with the relative underperformance of its shares over the past five years, firmly positions the streaming giant outside the current market’s favored group.
Netflix’s recent earnings report sheds light on its ongoing challenges. One significant issue is rising costs, particularly stemming from the company’s planned acquisition of Warner Bros. Discovery, which is expected to incur hundreds of millions in additional expenses by 2026. Simultaneously, Netflix aims to increase its spending on television shows and films by 10%.
Another concern is the deceleration in revenue growth; the company is projecting about 13% growth for this year, a decrease from 16% in previous years. This decline will likely exacerbate the financial strain, especially as Netflix ventures into high-cost territories such as live sports, intensifying its competition with platforms like YouTube.
Further complicating matters is Netflix’s cash flow situation. The company anticipates $11 billion in free cash flow, which fell short of analyst expectations. Consequently, its shares dipped as much as 6% during trading before ultimately settling 2% lower, reflecting a one-year low. This downward trend is rooted in issues that have plagued the company since mid-2025, including sky-high market expectations, heavy spending sensitivity, and unexpected tax charges. Unlike its Magnificent 7 counterparts, Netflix lacks the cushion of the AI narrative to bolster investor confidence that its substantial expenditures will lead to significant earnings growth.
Despite these challenges, analysts remain predominantly optimistic about Netflix’s prospects. Approximately 65% of analysts recommend a “buy” on the stock at its current levels, while only 4% suggest a “sell.” Investment firm Morgan Stanley has indicated that the market may be underestimating Netflix’s efforts to build a substantial three-billion-dollar advertising business. Moreover, other analysts argue that the stock’s substantial decline has led to an attractive valuation, enhancing its appeal.
The pressing question remains whether investors will re-engage with Netflix and help the streaming service reclaim its former prominence in an ever-evolving market.
