Netflix vs. Spotify: Which Streaming Giant Is Poised for a Comeback in 2026?

Both Netflix (NASDAQ: NFLX) and Spotify (NYSE: SPOT) had great starts to 2025, but investors soured on the streaming giants in the back half of the year. Shares of both have fallen between 25% and 30% since midyear as poor earnings results have weighed on the stocks.

But with the drop in price for each stock, investors may have an opportunity to scoop up shares of a great company at the forefront of a long-term growth trend in streaming media. One of the streaming companies stands out as a great opportunity heading into 2026.

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What's weighing on each stock?

Shares of Spotify began to fall after the company released its second-quarter earnings results, which showed a worsening operating margin and negative earnings per share. It course corrected somewhat in the third quarter, but CEO Daniel Ek announced he was stepping down and the company provided weak fourth-quarter guidance, sending the stock lower.

Netflix stock also sold off after its second-quarter earnings due to management's disclosure that its strong financial results and outlook were driven by improvements in foreign-exchange rates rather than increased engagement or willingness to pay from consumers. The sell-off accelerated after a one-time Brazilian tax weighed on third-quarter results. More recently, Netflix's proposed acquisition of Warner Bros. Discovery has pushed shares lower, as investors see regulatory and operational challenges for the merger.

To be sure, neither company is showing significant weaknesses. However, with both stocks priced for strong and continuous growth, any minor hiccup can lead to investors losing confidence in the company's value and selling their shares. A company with a strong competitive advantage is better equipped to weather setbacks and overcome financial challenges, as its operating results ultimately prevail in the long run. I believe one of these companies has a greater competitive advantage that should enable it to produce strong long-term results and could allow the stock to bounce back quickly in 2026.

Which company has a wider moat?

One of the biggest indicators that Spotify and Netflix have competitive advantages in the market is that they've both been able to increase prices. Spotify made two pricing changes in the United States in 2023 and 2024, and another price increase could be on the way next year. Netflix, meanwhile, has consistently raised prices since 2014.

Spotify currently charges a premium relative to competitors, but it also includes additional content with the price. Specifically, premium subscribers can listen to 20 hours of audiobooks each month. Differentiated content is key for the streaming service to stand out from the pack.

But acquiring differentiated content in music streaming is practically impossible. Every service has access to the same 100 million songs, and they all pay the record labels relatively standard royalties for access to their libraries. That means that Spotify doesn't have a clear advantage in content, and it doesn't have a lot of leverage on its content costs. That will limit its margin expansion over time.

By comparison, Netflix has built a differentiated library of unique content on its platform through a combination of original productions and exclusive licensing agreements. As the largest video streaming service, it can afford to spend more money on productions and licensing agreements for key content, as it amortizes those costs over a larger number of subscribers. It doesn't pay a fee every time someone streams a show like Spotify. As a result, it's able to produce meaningful margin expansion over time.

Netflix historically sets a target operating margin at the start of the year. With its highly predictable subscription revenue, it's able to manage its content spending to come very close to its target in normal circumstances. Despite the Brazilian tax it paid last quarter, management's full-year outlook still calls for its operating margin to expand 1.6 percentage points for the year. Spotify has less room to control costs and expand its margins.

A better value

The market prices Netflix stock at a much more attractive valuation than Spotify, with shares trading hands at less than 30 times analysts' consensus estimate for 2026 earnings. Spotify shares, by comparison, will cost closer to 50 times 2026 estimates.

That said, analysts expect Spotify to deliver strong earnings growth over the next few years. But with its high valuation, any revision in those estimates lower could cause the stock to pull back further. Netflix might not have the same expected earnings per share growth, but investors can have more confidence in the company hitting those targets. Strong execution in 2026 should push the stock price back toward its all-time high and beyond.

Adam Levy has positions in Netflix. The Motley Fool has positions in and recommends Netflix, Spotify Technology, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.