Netflix regains favor with big investors

Bill Ackman’s return to Netflix, a stock that once cost him $400 million, suggests that Wall Street is warming back up to the world’s largest streaming platform. Ackman’s hedge fund, Pershing Square Capital Management, has acquired 3.15 million shares of Netflix, representing approximately 4.9 percent of the fund’s roughly $23 billion portfolio.

Ackman’s purchase marks a significant reversal for him, who lost more than $400 million on the same stock in 2022 after bailing out just months after buying in. At the time, Netflix was experiencing its first subscriber decline in a decade, which rattled Ackman and led to his exit.

Netflix has since effectively won the streaming wars, and Pershing Square projects that the company will compound revenue at a double-digit growth rate, with content costs growing more slowly than revenue. This combination is expected to drive meaningful margin expansion.

Pershing Square described Netflix’s valuation as representing a substantial discount, allowing it to acquire a premium business at a favorable price. Netflix shares jumped 3.4 percent on the day of the disclosure, indicating that investors are optimistic about the company’s prospects.

One of the significant developments since Ackman’s 2022 exit is the emergence of Netflix’s advertising business as a genuine revenue contributor. This barely existed when he first bought in, but the company has made significant strides in recent months. Netflix closed its 2026 US upfront advertising season with commitments that nearly doubled year-over-year.

Advertisers were drawn to returning franchises such as Bridgerton, Emily in Paris, and Love Is Blind, as well as live sports programming spanning NFL games, WWE, and MLB. Demand for the 2027 FIFA Women’s World Cup was particularly acute, with Netflix reporting that it had sold out game sponsorships and nearly exhausted all available in-game inventory.

Netflix has also expanded its programmatic advertising capabilities through integrations with Google, Amazon, Yahoo, and The Trade Desk, and achieved Media Rating Council accreditation for US in-stream video impressions across connected TV, mobile, and desktop.

The valuation discount Ackman is exploiting sits against a backdrop of solid underlying performance. Netflix reported Q1 2026 revenue of $12.25 billion, up 16 percent year-over-year.

They confirmed that they are closing Night School Studio, the developer of Oxenfree, which they acquired in 2021 as their first studio purchase.

Ackman’s investment is a vote of confidence in Netflix’s ability to deliver.

Ackman’s hedge fund has a track record that lends weight to the move. The combination of a compressed multiple, a scaling advertising business, a substantial buyback program has made the bear case progressively harder to sustain.

It’s likely that more investors will take notice as Netflix continues to execute on its strategy. The company’s prospects are now more promising, and its advertising business is a major contributor to its revenue growth, with returns from this sector expected to increase.