Netflix's Newest Rival Has Nearly $70 Billion in Annual Sales. It Also Carries About $82 Billion of Debt.
2026-10-07 17:34
•Daniel Sparks •The Motley Fool
••• •• Axe Cap view
Netflix’s Strength Lies in Profitability, Not Just Revenue
Skydance's huge sales don’t mask a heavy debt burden, making Netflix the safer play despite rising content costs.
Skydance now boasts nearly $70 billion in revenue, surpassing Netflix’s $51 billion, but its $82 billion debt and $6.4 billion in annual interest strain profitability. Netflix, with a far lighter debt load of $14.3 billion and significantly lower interest costs, posted $13.3 billion in operating income last year versus Skydance’s $2.6 billion operating loss. This gap highlights why top-line revenue alone isn’t enough in streaming—it’s about controlling costs and debt. For South African investors, the message is clear: in a capital-intensive world, firms that manage leverage well, like well-run banks such as Standard Bank or FirstRand, are less likely to face distress. Netflix’s operating margin near 31.5% for 2026 signals solid earnings quality despite content cost inflation—something investors often overlook. But if content costs spiral even higher or subscriber growth disappoints, Netflix’s high valuation could come under pressure. this is just our opinion and not financial advice
We’d hold Netflix given its profitability and manageable debt. Skydance, with heavy leverage and losses, is best avoided for now. Locally, favour banks that control credit risk carefully, reflecting Netflix’s discipline in an expensive market.
- NFLX
- USD/ZAR
- Standard Bank
- FirstRand
- Content cost inflation overwhelms Netflix’s margins
- Skydance restructures debt and competes aggressively
7/10
Skydance, formed from Paramount's acquisition of Warner Bros. Discovery, now generates nearly $70 billion in annual revenue, surpassing Netflix's expected $51 billion. However, Skydance carries $82 billion in debt with $6.4 billion in annual interest expenses, compared to Netflix's $14.3 billion debt and $777 million interest expense. Despite larger sales, Skydance posted a $2.6 billion operating loss in 2025 while Netflix generated $13.3 billion in operating income. The analyst concludes Netflix remains the stronger competitor due to superior profitability and lower debt burden, though rising content costs pose a future challenge.
Our take is based on reporting first published by The Motley Fool.