Why Is Disney So Much Cheaper Than Netflix? This Is the Only Answer I Can Think Of.

Disney (NYSE: DIS) is much cheaper than Netflix (NASDAQ: NFLX) right now because the market still treats Netflix as the "finished product" of streaming economics, while it sees Disney as a powerful but complicated media conglomerate that is only partway through a transition.

The numbers from July and August back that up.

As of early August 2026, Disney trades at a trailing P/E of about 16.5, while Netflix sits near 23.1. Both multiples are well below their longer-term averages, but Netflix still commands a clear premium. Disney's market cap is around $180 billion, versus roughly $300 billion for Netflix, even though Disney generates more total revenue today.

Image source: Getty Images.

What's striking to me is that Disney's P/E is not only below Netflix's, but it is also far below Disney's own 10‑year average multiple of 46. In other words, the market has derated Disney much more aggressively than Netflix, even as both have seen their P/Es compress. That says the discount is not just about sector sentiment, it is about the kind of businesses investors think they are buying.

Netflix's elite streaming machine

Netflix's second-quarter 2026 numbers remind you why it still gets the "elite streamer" label. The company reported $12.56 billion in revenue, up 13.4% year over year, with an operating margin of 33.4% and diluted EPS up 11%. Management kept its full‑year operating margin target at 31.5%, which is a very high level for a pure content business that still spends heavily.

On top of that, Netflix has become a free‑cash‑flow story. It generated more than $9 billion in annual free cash flow in 2025, and trailing-12-month figures through mid‑2026 remain in the multibillion range. The ad tier is scaling toward roughly $3 billion in annual revenue, and paid memberships passed the 325 million mark globally. To me, that combination of double‑digit top‑line growth, 30% operating margins, and durable free cash flow is exactly what investors are willing to pay up for, even at a multi‑year low P/E.

Disney's improving, but more complicated, economics

Disney's latest quarter looks very good on its own terms. For fiscal Q3 2026, Disney reported $25.2 billion in revenue, up 7% year over year, with total segment operating income up 21% to $5.6 billion. Net income came in at $2.63 billion, and free cash flow was $3.1 billion for the quarter, reinforcing management's point that the company "generates a lot of free cash flow" and sits on a strong balance sheet.

Streaming is no longer a sinkhole. Disney delivered a 13% operating margin in Q3 for subscription video on demand and reiterated that it is on track for double‑digit streaming margins in fiscal 2026.

So why the cheaper multiple? I think it comes down to structure. Disney's direct‑to‑consumer businesses still sit inside a bundle that includes parks, cruises, consumer products, and legacy linear networks. Those experiences are terrific businesses, but they are capital intensive and exposed to travel cycles. Linear TV is in secular decline, and even if Disney manages that well, it's a drag investors have to model. Netflix does not carry any of that baggage.

Two different ways to bet on streaming

In my mind, Netflix's P/E premium exists because the company has already proved that pure streaming can deliver high margins, strong free cash flow, and consistent global growth. The July 2026 numbers reinforce that narrative: mid‑teens revenue growth, low‑30s operating margin, billions in free cash flow, and a fast‑growing ad tier.

Disney's cheaper multiple reflects skepticism that its streaming gains will fully shine through the noise of its other segments. Even with stronger earnings growth and rising free cash flow, investors are still asking whether capital will be allocated to parks, sports rights, or debt reduction rather than purely maximizing streaming returns.

For investors looking at the streaming and media space today, I see two distinct opportunities. First, Netflix is the higher‑multiple, more focused bet on the economics of subscription and ad‑supported streaming. Disney is the discounted way to own a diversified media and experiences powerhouse where streaming is finally turning from a cost center into a real profit engine.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.