Spotify and Netflix both reported Q1 2026 earnings that sent their stocks lower, but for very different reasons. Spotify beat profit estimates with genuine margin expansion, posting revenue of $4.53 billion, up 8.19% year over year, and EPS of $3.45 against a $2.950 consensus, while Premium subscribers reached 293 million and Premium gross margin expanded from 34% to 35%. Netflix booked $12.25 billion in revenue, up 16.19%, but EPS of $1.23 missed the $1.345 consensus, and its headline $5.09 billion free cash flow was inflated by a $2.80 billion one-time termination fee from the abandoned Warner Bros. deal. Spotify is doubling down on audio with podcasts and audiobooks, while Netflix is sprinting into GenAI filmmaking, live sports, and kids gaming simultaneously. Spotify's $824 million free cash flow and expanding Premium margins signal a compounding audio model, despite a 42 P/E and a €410 million MLC lawsuit risk.
Netflix IncQ1 EPS missed consensus and free cash flow was inflated by a one-time termination fee.
Spotify Technology SAQ1 earnings beat with genuine margin expansion and strong free cash flow.
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