He Stopped Watching.…?
You open Netflix looking for something to watch.
Ten minutes pass. Then twenty.
A few trailers. A few additions to My List. Somehow, nothing makes it onto the screen.
Steve Cahill noticed his own version of that problem.
The Wells Fargo analyst had been a longtime Netflix subscriber, but recently found himself watching less of it.
Was it just him?
Cahill dug into Netflix’s upcoming content slate and the studio turnaround investors had been waiting for.
What he found only added to his concern.
Let’s see.⇩
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What Did He Find?
Cahill’s concern starts with the content.
He believes Netflix’s studio turnaround is taking longer than expected, with fewer major releases capable of pulling viewers back in.
And engagement has been moving slowly.
→ Netflix viewing hours grew just 1.5% in 2025.
→ In the first half of 2026, they grew 2%.
Still growth. Just not much of it for a service approaching a billion viewers.
Cahill’s concern is that slower engagement eventually puts pressure on pricing and advertising too.
So he made the call:
→ Wells Fargo downgraded Netflix NFLX ( ▼ 0.91% ) to Underperform.
But Netflix has a very different interpretation of those viewing numbers. ↓
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The Tube Trouble…
A few days later, another analyst reached a similar conclusion.
Netflix may have a YouTube problem.
HSBC’s Mohammed Khallouf followed with a 21% target cut, from $96 to $76, and downgraded Netflix from Buy to Hold.
His concern was more specific: YouTube is taking a larger share of the TV viewing.
In July, YouTube captured a record 14.2% of U.S. TV viewing, while Netflix fell to a multi-year low of 7.8%, according to figures cited by Khallouf.
→ YouTube: 14.2% — record high
→ Netflix: 7.8% — multi-year low
And YouTube isn’t exactly treating this like a side project.
Khallouf says the platform is offering top creators financing, larger payouts and marketing support in exchange for exclusivity, while introducing features like Shows, which packages creator content more like traditional episodic television.
Then there’s the spending.
YouTube’s total content spend is estimated at roughly $23 billion this year, versus about $20 billion for Netflix.
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The Rebuttal…
Netflix has a different way of looking at the slowdown.
Viewing hours don’t pay the bills.
Live programming is a good example.
Netflix spent roughly 5% of its 2026 content budget on live events.
They accounted for just 1% of viewing hours.
And yet, those events produced six of Netflix’s ten biggest new-member signup days over the past five years.
→ 5% of the budget
→ 1% of viewing
→ 6 of the top 10 signup days
That changes the math a little.
An hour that brings in a new subscriber can be worth a lot more than an hour that simply keeps someone watching.
So while analysts are watching the clock, Netflix is watching something else:
What those hours actually do!
So Far, So Good.
Whatever is happening with viewing hours, it hasn’t shown up the same way in Netflix’s financials.
For the full year, the company is guiding to:
→ $51.0–$51.4 billion in revenue
→ 31.5% operating margin
→ ~$12.5 billion in free cash flow
Pricing is holding up too.
Netflix says recent increases in the U.S., Mexico and Spain have performed in line with previous price hikes.
Then there’s what it’s doing with all that cash.
Netflix repurchased $4.7 billion of its own stock in Q2, its largest quarterly buyback ever.
And it still has roughly $27.1 billion authorized for more.
So far, slower growth in viewing hours and strong financial performance have managed to coexist.
Cahill’s argument is that eventually, they may not.↓
Next Stop: October 20
Netflix reports third-quarter results on October 20.
That gives investors the next chance to test both sides of the argument.
Cahill will be looking for signs that engagement is losing momentum, particularly if slower viewing begins to show up in advertising or pricing.
Netflix has a different case to prove.
Management expects advertising revenue to roughly double this year to around $3 billion, while maintaining that viewing hours alone don’t determine how much money the platform can make.
One quarter probably won’t settle it.
But the next few reports should make the divide clearer:
Can Netflix keep making more from its audience even if that audience isn’t spending much more time watching?
One Bear, Plenty of Bulls…
And that puts Cahill in some fairly lonely company on Wall Street.
Before his downgrade:
→ 7 Strong Buy • 28 Buy • 16 Hold • 0 Sell
The average analyst target also remains well above Netflix’s current price.
So this isn’t a broader change in how Wall Street sees Netflix.
At least not yet.
Cahill is making a more specific bet: that slower engagement will eventually start showing up in the financials.
Most analysts are still waiting for the evidence.
Analyst ratings and targets are presented for informational purposes only, not as a Trading Lessons recommendation.
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