Bill Ackman invests 4.9% of fund in Netflix after $400 million loss

Bill Ackman has returned to Netflix, placing a new bet on the streaming giant that amounts to roughly 4.9% of his Pershing Square USA fund’s portfolio. The hedge fund disclosed a position of 3.15 million shares in its semiannual report released on Wednesday evening, marking a significant re-entry into a stock that previously caused the firm substantial financial pain. This move comes less than three years after Ackman liquidated a massive Netflix stake at a staggering loss, a decision that has since become a notable cautionary tale in the investment world. The news sent Netflix shares surging more than 5% on Thursday, signaling strong market confidence in Ackman’s renewed conviction. The timing of this disclosure is particularly sharp because it follows a period of intense scrutiny regarding whether the streaming wars were truly over or if the industry was still in a fragile state of competition. Ackman’s return is not a minor adjustment but a substantial allocation of capital, indicating that he views the current valuation and business trajectory as fundamentally different from the uncertain landscape he fled in 2022. For investors watching hedge fund flows, this is a major signal. Ackman is known for taking large, concentrated positions in companies he believes are mispriced, and his willingness to revisit Netflix suggests he sees a durable competitive advantage that was not apparent during his previous exit. The market’s immediate positive reaction underscores the weight of his opinion in the broader financial community, where his track record, despite occasional stumbles, commands significant attention and often moves stock prices on its own.

The decision to re-enter Netflix is all the more striking given the painful exit Ackman executed less than three years ago. In early 2022, Pershing Square invested over $1 billion into the company, only to sell the entire position in April of the same year after locking in a loss of more than $400 million. The original trade unraveled quickly when Netflix reported its first subscriber decline in over a decade, causing the stock to plummet. At the time, Ackman argued that Netflix’s pivot to an ad-supported tier and other business model changes introduced too much uncertainty to predict future cash flows with confidence. He viewed these shifts as risky experiments that could destabilize the core subscription revenue. However, the very changes that drove Ackman out have since become the engine of Netflix’s current growth. The ad-supported tier has not only stabilized subscriber numbers but has also opened a lucrative new revenue stream. By exiting when the company was in transition, Ackman missed the subsequent recovery and the solidification of Netflix’s market dominance. This history adds a layer of redemption to the new trade. It demonstrates that Ackman is willing to revisit his past mistakes if the fundamentals have shifted favorably. The contrast between the uncertainty of 2022 and the clarity of the current business model is the central theme of this investment thesis. He is not just buying a stock; he is betting on the successful execution of a strategy he previously deemed too risky. This narrative of correction and renewed faith is compelling to investors who follow value-oriented hedge funds, as it suggests Ackman believes the market has fully priced in the risks and is now undervaluing the proven rewards.

Pershing Square’s report frames Netflix as the definitive winner of the streaming wars, citing a subscriber base of more than 325 million that dwarfs competitors like Disney+ and HBO Max. This scale allows Netflix to spend heavily on high-quality programming while spreading costs across a larger audience than any rival can match, creating a defensive moat around its business. Financially, the company is showing robust health. Second-quarter revenue rose 13.4% year over year to $12.6 billion, with an operating margin of 33.4%. Management expects this margin to reach 31.5% for the full year, up from 29.5% in 2025, implying annual operating income growth of more than 20%. Perhaps most importantly for Ackman, the advertising business he once feared is now expected to roughly double this year to about $3 billion in revenue. This transformation from a pure subscription model to a hybrid engine of subscriptions and ads has validated the risks Ackman initially rejected. The firm’s analysis suggests that Netflix has moved past the growth-at-all-costs phase into a period of profitable expansion. The ability to generate higher margins while growing revenue indicates operational maturity. For Ackman, the uncertainty has been replaced by predictable, scalable growth. The streaming wars, characterized by heavy spending and subscriber churn, appear to have settled in Netflix’s favor. The company now enjoys pricing power and brand loyalty that competitors are struggling to replicate. This structural advantage, combined with the new revenue streams from advertising, provides the certainty Ackman demanded in 2022. The investment is not a gamble on future potential but a bet on current execution and market leadership. As the industry consolidates and content costs stabilize, Netflix’s position as the largest and most profitable streamer becomes increasingly valuable. Ackman’s stake reflects a belief that this leadership will translate into sustained shareholder returns.