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I. The After-Hours Disconnect Masks a Highly Profitable Reality

Let me be absolutely clear right out of the gate: This was a strong quarter for Meta. The operational metrics demonstrate a business actively accelerating its dominance.

If you only watched Meta’s stock price plummet in after-hours trading, you would be forgiven for thinking the company’s core business was imploding. Wall Street took one look at the elevated capital expenditure (CapEx) guidance and hit the SELL button. But before we address the infrastructure spending, we need to talk about the actual earnings generated by the business.

To establish an accurate baseline, we must first adjust for one-time items. In Q1, Meta recognized an $8.03 billion income tax benefit. This partially offsets the $15.93 billion non-cash tax charge recorded in Q3 2025 due to the “One Big Beautiful Bill Act.” Excluding this benefit, Meta’s adjusted EPS would have been $7.31, which is $3.13 lower than the headline $10.44 figure. Nevertheless, this still represents impressive 13.69% YoY growth compared to the $6.43 EPS in Q1 2025.

But the market is currently treating Mark Zuckerberg’s infrastructure spend like a reckless cash incinerator, completely missing the fact that Meta’s organic growth drivers and profit margins are already being demonstrably and sustainably enhanced by their artificial intelligence deployments.

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II. The Core Volume Engine is Accelerating Despite Geopolitical Shocks

I have consistently maintained that ad impression growth is the North Star metric for Meta. It serves as undeniable proof of strong consumer demand, high user engagement, and expanding platform inventory.

In Q1, worldwide ad impressions accelerated by +19% YoY. Let me reiterate: It is exceptionally difficult for a trillion-dollar company to grow volume at that absolute level. When you are already serving billions of users daily, finding 19% more inventory to sell is a notable engineering feat, yet they are doing it cleanly and efficiently across the entire globe.

• The U.S. & Canada region matched its blistering Q4 pace, growing at +13% YoY.

• Europe showed acceleration, jumping from previous trends to a 17% growth rate.
  

But there is a specific detail from the follow-up Q&A call that makes this volume growth—and the resulting 33% YoY revenue growth (or 29% on a constant currency basis)—so incredibly impressive. CFO Susan Li revealed that advertiser spend actually softened mid-quarter due to the sudden geopolitical conflict in Iran:

“We did see reduction in advertiser spend coinciding with the beginning of the conflict in Iran at the end of February, and that continued through the quarter. We saw the most pronounced impact within the Middle East user region, but we also saw some softer trends in markets outside the Middle East, including in the U.S. and Western Europe. I would say we’ve begun to see some signs of improvement in demand... coming into April.”

Meta successfully navigated these mid-quarter geopolitical headwinds, with advertising demand rebounding strongly into April. This pivot is a significant indicator for investors, as it derisks the robust Q2 revenue guidance of $58–$61 billion. Compared to Q2 2025 revenue of $47.5 billion, this guidance implies a 22% to 28% YoY growth rate. I remain more bullish than the consensus, believing Meta can sustain a 20%+ annual revenue growth rate for several years.

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III. Meta’s AI is Breaking the Fundamental Laws of Digital Ad Economics

As I have covered before here on Accrued Interest, in the advertising sector, revenue is driven by a very simple equation: Volume (Ad Impressions) multiplied by Price (CPM, CPC, etc).

Historically, these two forces share an inverse relationship. For instance, if a platform aggressively increases ad load by flooding the market with inventory, the average price typically collapses as supply outstrips demand.

In several of my Accrued Interest deep dives, I have made it a point to highlight this exact value trap play out in lower-quality social media businesses. For example, as I noted in my recent Q4 deep dive, Pinterest grew its ad impressions by a massive 41%, but their pricing collapsed by -19%. This proved they were merely masking weak organic demand by dumping cheap, unoptimized inventory onto the market.

Meta, however, is doing the exact opposite. Over the last four quarters, Meta has achieved a rare feat, which once you chart it out it looks almost as if they are breaking the fundamental laws of digital ad supply and demand. Please see the chart here.

If we look back to the “Reels Ramp” of 2023, Meta’s impressions surged, but pricing fell as they forced new, under-monetized short-form video inventory into the feed. Fast forward to what I am dubbing the “AI Supercycle” of Q1 2026, now Meta expanded its overall ad supply by 19% while simultaneously hiking the average price +12% YoY.

This dynamic is precisely why I believe Meta’s future will be so bright! Meta’s recommendation engines have made their ad targeting so precise—and the resulting conversions for brands so high—that advertisers are willingly bidding up the price of ads even as Meta adds new inventory. They are extracting more money from brands because the AI ensures a better return on ad spend (ROAS).

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IV. Strong Engagement KPIs Prove Meta’s Algorithm is Winning

Regardless of whatever anecdotal data you hear from your friends and family - one fact is no longer in dispute. Meta’s algorithm is winning the war for consumer attention. For years, I used to hear people complain that they missed the “old Facebook” but clearly their behavior says otherwise! Artificial intelligence has largely solved the content discovery problem, transforming the platforms from simple social networks into daily, high-frequency entertainment habits.

During the earnings call, management explained how their AI models are keeping users scrolling longer than ever:

• Instagram Reels: Ranking and recommendation improvements in Q1 drove a 10% lift in total Reels time spent.

• Facebook Video: Total video watch time increased more than 8% globally in Q1, representing the largest absolute QoQ gain the company has seen in four years.

• Freshness as a Feature: Same-day posts now represent over 30% of all recommended Reels served to users. This metric is more than double the levels seen just a year ago.

AI isn’t just serving engaging content; it is serving fresh content faster and more accurately than ever before. Meta is fighting back competitors like TikTok and ensuring its own platforms remain the daily default for billions of people.

But the returns on their AI investments aren’t strictly limited to the core social feed. We are seeing alternative, high-margin monetization engines catch fire across the company.

• Business Messaging: Conversations facilitated by WhatsApp Business AIs grew to more than 10 million per week in Q1, up 10x since just January 2026.

• Partnership Ads: More than doubled YoY to a $10 billion revenue run-rate.

This quarter’s commentary validated my recent thesis regarding Meta’s aggressive structural cost discipline. As I wrote in “AI Tracking Employee Keystrokes Validates Meta Bull Case,” management is actively trading human payroll for compute infrastructure.

During the call, CFO Susan Li confirmed Meta plans to downsize its employee base in May. She explicitly stated that this “leaner operating model” will allow the company to move quickly and help offset their substantial infrastructure investments.

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V. The $145 Billion Infrastructure Bill is a Moat Enhancer, Not a Liability

Now, we have to address the primary cause of the stock sell-off - the forward CapEx guidance. Meta anticipates its 2026 capital expenditures will be in the range of $125-$145 billion, a notable increase from their prior range of $115-$135 billion.

Bearish analysts view this multi-year investment as a financial liability; I view it as a strategic moat. By outspending competitors, Meta is effectively securing the global AI supply chain through 2027, creating significant barriers to entry.

To counter concerns regarding margin collapse, one only needs to look at the profitability guardrails established by management. Susan Li explicitly guided that 2026 operating income will exceed 2025 levels. I believe the market will tolerate elevated CapEx as long as the core advertising engine generates enough cash to outpace rising costs.

When you map this reality against the findings in my recent deep dive, “Back to the EBITDA: Decoding Meta’s $1,116 Executive Playbook,” the picture becomes crystal clear. The board’s newly issued executive compensation structure demands immense value creation before the C-suite sees a dime. I now see where the Meta Board gained the confidence to set such aggressive stock option targets. This quarter demonstrated to me that Zuckerberg and the management team know exactly what levers to pull to kick the company’s profits into high gear.

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VI. The Multiple Expansion Case: The Meta Discount Will Not Last Forever

The strong Q2 revenue outlook of $58–$61 billion, supported by the April rebound in ad demand, proves that this momentum is sustainable. The market is overlooking the fact that the ROI on Meta’s CapEx is already manifesting in user engagement, ad volume expansion, and structural efficiency.

Meta at $600 is a compelling long precisely because it is a rare opportunity when you can buy one of the top 2 most dominant advertising businesses on the planet at a below market multiple.

Using a stock price of $600 for Meta, it trades at approximately 18.75x 2026 GAAP EPS of about $32.00 per share, and at 17.4x 2027 earnings GAAP EPS of about $34.50 per share. For context, the S&P 500 trades at 2026 P/E of 22.2x and 2027 P/E of roughly 19.2x. (Estimates below from TIKR, pricing above using market price.)

While Meta is a buy on valuation alone, I also believe the Street’s 2027 and 2028 revenue estimates are still far too low. Consensus calls for +25% YoY revenue growth in 2026, but is forecasting deceleration to less than 20% in subsequent years. I think time will prove this to be overly pessimistic.

As I detailed in my recent analysis of the $1,116 executive stock options, Meta’s underlying engine has the pricing power, the volume expansion, and the new AI revenue streams required to sustain 20%+ YoY growth for the next several years. This Q1 print proves that thesis is intact.

I firmly believe that Meta stock does not deserve to trade at a discount to the broader market, and will not stay this way forever. When management tells you exactly how they are going to build a trillion-dollar moat, and the real-time data shows the plan is working, you don’t sell in after-hours due to a CapEx spike. I am maintaining my Outperform rating on Meta.

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-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Introduction

If you have been reading Accrued Interest for a while, you know my golden rule for media investing: Follow the growth in intrinsic value, not just the headlines. When a company misses the mark, I want to look under the hood to see if the market is overreacting to a temporary blip, or if it is finally waking up to a structural flaw.

This morning, Spotify reported its Q1 2026 earnings, and the market ruthlessly punished the stock, sending it down 13%. While many retail investors see this massive drop as a “buy the dip” opportunity, I see it differently.

Having spent over 15 years inside media boardrooms, I’ve learned to decipher when an investor relations deck masks a deteriorating core engine. The Q1 print revealed an audio-first business model hitting a hard ceiling. At current valuations, this stock is a value trap.

Here is why I am initiating with an Underperform rating on Spotify, and why true digital media winners like Meta, YouTube, and Netflix will leave it in the dust over the next 18 months.

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I. The Q2 Guidance Whiff Signals a Top-of-Funnel Drought

Wall Street does not price growth stocks based on the customers they have already acquired; it prices them based on their future cash flows, which are dictated by the rate at which they are acquiring new users. This is where Spotify’s Q1 report was a disappointment.

Management guided for just 6 million net new premium subscribers in Q2, missing the analyst consensus of 9 million. Rather than acknowledge a slowing core engine, Spotify’s leadership attempted to downplay the Q2 weakness by framing it as a tough YoY comparison and pushing growth expectations into the second half of the year.

CFO Christian Luiga stated, “We reiterate our previous statement that we expect another full year of healthy subscriber growth, weighted more towards the back half of the year“.

As a former operator, I can tell you that promising that growth is “weighted more towards the back half” is a classic management delay tactic when current quarter numbers miss the mark. It forces investors to essentially take their word that a re-acceleration is coming months down the line. While it is true that subscriber growth is historically strongest in Q4 due to discounting and the organic marketing push of “Spotify Wrapped”, my personal point of view is this sounds like management is dialing back growth expectations.

Price sensitivity is absolutely real when it comes to Spotify. “Mr. Market” correctly interprets the soft Q2 guidance as Spotify struggling to absorb recent price hikes without sacrificing volume. If churn isn’t increasing due to price hikes, then the alternative explanation is that customer acquisition is simply drying up—which is arguably a MUCH worse structural problem for a growth stock like Spotify.

The ARPU (Average Revenue Per User) stagnation in Spotify is very clear. Despite raising prices, ARPU remained relatively flat YoY at €4.76.

Simply put, if aggressive price increases cannot meaningfully drive ARPU higher, the core growth engine is losing its torque, and the P/E multiple must come down.

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II. “Empty Calorie” MAU Growth is Masking a Broken Advertising Engine

Spotify is successfully getting people to use the app, but they are struggling to get them to pay for it, leading to growth that looks good on paper but doesn’t translate to the bottom line. This creates a massive top-of-funnel bottleneck.

For Q1-26, Spotify added 10 million Monthly Active Users (beating the 8M guidance), but Premium subscriber net additions came in at a mediocre 3M. MAU growth does not pay the bills if it fails to convert into high-margin subscription revenue.

Let me explain why investors are concerned about the composition of Spotify’s user growth. The ad-supported tier is indeed growing faster than the premium tier, and the ratio of new users skews heavily toward the lower-monetizing segment.

Let’s look at the sequential growth from Q4 2025 to Q1 2026 to see exactly where the new users are going:

For Q1, 70% of Spotify’s net new users joined the Ad-Supported tier (7 million out of 10 million), while only 30% joined the Premium tier (3 million out of 10 million).

• Monthly Active Users (MAUs): Grew from 751M to 761M, net addition of 10M.

• Premium Subscribers: Grew from 290M to 293M, net additions at 3M.

• Ad-Supported MAUs: Grew from 476M to 483M, net additions at 7M.

This dynamic perfectly illustrates the “Empty Calorie” MAU growth problem. Top-of-funnel growth looks great on a press release, but it is deeply problematic for the financials when you look at how these two tiers monetize. Despite 483 million users sitting on the Ad-Supported tier, that segment only generated €385 million in Q1 2026. Worse, that ad revenue actually declined by -5% Y/Y. Meanwhile, the 293 million Premium users generated €4,148 million.

Adding millions of free users costs money in streaming delivery, compute power, and royalties. Because ad revenue declined while user engagement increased, the Ad-Supported Gross Margin fell to 13.0% (down 102 basis points Y/Y). Contrast this with the Premium Gross Margin, which expanded to 34.8%.

This is a clear structural flaw that the bulls cannot simply choose to ignore. Spotify is successfully acquiring millions of new listeners, but 7 out of 10 of them are entering a tier with shrinking revenue and deteriorating margins. If they cannot convert these free listeners into premium subscribers, the sheer volume of MAUs acts as a margin anchor rather than a growth engine. Management is clearly trying to spin this story.

The Q1 2026 investor relations deck on slide 9 claims “Premium growth driven by ARPU gains”—but investors should much prefer to see growth driven by users, not just pricing.

The more alarming trend is the lack of traction in Spotify’s advertising business. The bullet point on page 9 stating “Advertising business transformation continues” is classic boilerplate for a failed headline. Even stripping away FX impact, Ad revenue grew only +3% on a constant currency basis. That 3% growth is unacceptable and lags significantly behind the +14% ad-supported monthly user growth reported elsewhere. Investors have been far too sanguine here.

A big picture point is the monetization hierarchy: Audio is the lowest on the totem pole. I have long argued that advertisers have a hard, low ceiling in terms of how much they want to invest in audio, a ceiling investors continue to underestimate.

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III. SPOT Bulls Are Drunk on a FCF Sugar High

I want to be fair to the bullish investors and acknowledge that Q1 did present some optical highlights. The Q1 2026 report contained several strengths that the bulls will be using to defend the stock. Here is the ammunition the other side is working with…

Spotify Has Strong Free Cash Flow. If there is one metric that bulls love, it is free cash flow, and Spotify is generating it at a staggering clip. Spotify delivered €824 million in FCF just in Q1. This brings their trailing twelve-month (LTM) Free Cash Flow to an impressive €3.2 billion. When a company is printing over €3 billion in cash a year, bulls will argue that management has immense optionality for share repurchases, which can artificially support the stock price and boost EPS even if top-line growth slows.

SPOT Beat Operating Income & Profitability Guidance. Despite the “Empty Calorie” MAU growth problem we discussed, management is executing ruthlessly on cost discipline. Operating Income came in at €715 million, beating their guidance of €660 million. Gross Margin also beat expectations, finishing at 33.0% against a forecast of 32.8%. This reflected a 133 basis point expansion year-over-year. Bulls will point out that even if revenue growth is decelerating, Spotify is proving it can expand its profitability profile. (I would still argue this is not enough.)

Q1-26 MAUs Actually Beat Expectations. While the composition of the user growth leans heavily ad-supported, the absolute top-of-funnel volume is still expanding faster than management initially projected. Spotify added 10 million MAUs in Q1, bringing the total to 761 million, which surpassed their guidance of 759M. This outperformance, while small, was driven by the Rest of World and North America.

Early AI Engagement appears to be Extremely Sticky. Spotify is aggressively trying to build an engagement moat using AI, and the early data is highly compelling. Management noted that their AI DJ is closing in on 100M users. A newly released feature called “Song DNA” hit 52 million users in just 4 weeks. Co-CEO Alex Norström argued that these features drive user engagement (days per month), which acts as a leading indicator for retention and long-term lifetime value (LTV).

However, these points mask deeper structural issues and a Total Addressable Market (TAM) that is much smaller than investors realize. Looking at record Q1 free cash flow gives investors false confidence; strong historical performance does not promise future returns. The market is calculating the NPV of future cash flows, and everything we’ve discussed indicates FCF growth is not going to accelerate without structural changes. Simply put, it is hard to see a path for Spotify to grow as a healthy business if ad-supported gross margins remain less than HALF the premium gross margin of 34.8%.

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IV. Royalty Ceiling Makes the 33x Multiple a Value Trap

The market is waking up to the inherent limitations of the audio-first business model, especially when compared to video streaming or diversified big-tech platforms.

A simple reason many investors overlook is that audio-first services can never monetize like video because companies like Spotify are paying almost 70% of gross dollars to the record labels. Notice how Spotify’s gross margins are in the low 30%s. This creates a structural, permanent ceiling on how high their gross margins can realistically go.

At current prices in the $430s, Spotify is trading at a premium undeserved for the business they are today, and more suited for a business they will never become. When a company lacks diverse monetization levers and its primary lever (subscription pricing) shows signs of exhaustion, the market will ruthlessly compress its earnings multiple. Investors are simply refusing to pay a premium valuation for a business model with capped profitability.

The current consensus 2026 and 2027 GAAP EPS (pre-earnings) were at roughly $13 and $16, meaning the stock is trading at P/E multiples of 33x and 27x, respectively. This is too high on an absolute basis given the future free cash flow trajectory, and it is definitely too expensive when you compare it to true digital juggernauts like Meta and Google, which are somehow trading at cheaper multiples while actually owning their underlying infrastructure and networks.

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CONCLUSION

An overarching observation I have with Spotify is that because they are the undisputed #1 publicly traded audio company, I think some investors have unrealistic thoughts on their potential TAM (total addressable market). At this premium multiple, I rate Spotify stock an Underperform.

I fully expect it to lag the S&P 500 over the coming year. More importantly, I expect Spotify’s media competitors to significantly outperform them in stock price—namely YouTube (Google), Netflix, and Meta, which remains a massive leader in all things digital advertising. These platforms do not have to hand over 70% of their revenue to legacy record labels just to keep the lights on. They dictate the terms, control the inventory, and possess the pricing power that Spotify lacks.

Until Spotify can prove that its ad-supported tier is a viable, high-margin business rather than a loss-leader, the 13% drop we saw this week is just the beginning of a long, painful multiple compression. Avoid the stock.

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-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

Please subscribe to read the rest of the Accrued Interest Daily Update for April 27.

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A) Meta’s Inevitable Push Into Connected TV

I’ve been tracking today’s Digiday report, which reveals that Meta has been holding exploratory meetings since early 2025 with supply-side players, including Magnite and Comcast-owned FreeWheel, to assess how it could access CTV inventory at scale. I see this as an “audience extension” model—essentially building the “Meta Audience Network” but for the living room. This would allow advertisers to use Meta’s targeting to reach users on third-party streaming inventory beyond its owned-and-operated apps. Digiday notes that “Meta’s core strength lies in performance advertising, particularly among small and mid-sized businesses”, and I believe moving to CTV unlocks a massive new pool of spend for them.

This move would perfectly align with Meta’s existing strengths: deterministic user data, cross-device identity, and AI-driven optimization. Bringing these tools to the living room capitalizes on the “CTV-to-mobile” loop, where ads viewed on television drive measurable, direct-response actions on mobile devices. They are also facing pressure as competitors like Pinterest (which purchased tvScientific) and Amazon move into the same space.

Today’s news is important because it demonstrates how powerful Meta is that they can go after ad budgets in almost every format. It’s almost as if no company is truly safe from competing with Meta. This is why it is so easy for me to be bullish. Due to their sheer size and dominance in digital advertising, it is inevitable that they are going after TV advertising budgets.

Discussing this inevitably brings up the competition from YouTube. But as I have been saying on Accrued Interest, both can win. There are still tens of billions of dollars being spent with legacy media players that Meta, YouTube, and Netflix can still take away before they even begin cannibalizing each other.

I think it is a huge mistake when people define “Streaming” as a distinct category. The way ad budgets are actually allocated in the real world—there is only one category, and that is VIDEO. As I detailed in my article on the Pokémon Theory of Media Investing, this is yet another reminder of the fundamental strength of Meta’s business model.

I am still bullish on Meta. With the stock at $676 per share, I am eagerly awaiting their Q1-26 earnings this week.

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B) Amazon Expands Prime Video’s Value with Oprah

I read in the New York Times today that Amazon reached a multiyear licensing deal with Oprah Winfrey. Beginning this summer, she will produce twice-a-week video podcasts and specials for Amazon. The Times quoted Steve Boom saying they are happy to be along for the ride. I see this as a clear signal of where the market is headed; more video being viewed on Prime.

This partnership is deeply integrated into Amazon’s retail ecosystem. The deal includes a dedicated landing page on Amazon.com for her “Favorite Things“ holiday list, and the two parties will share sales and advertising revenue. Amazon plans to leverage its Audible, Kindle, and Goodreads platforms to expand the reach of Oprah’s Book Club as it approaches its 30th anniversary in September. This fits into Amazon’s recent podcast unit restructuring, where they split their Wondery podcast division, moving talk-show style video podcasts into a newly named “Creator Services” division.

The news regarding Oprah is significant because it represents more than just a platform shift for a show that already commands nearly a million YouTube subscribers and seven-figure viewership per episode. The true narrative lies in Amazon’s effort to broaden the distribution of a premier talk show brand, effectively positioning Prime Video as a dominant aggregator in the evolving digital video landscape.

This shows why you can’t focus on strict legacy categories like “streaming” or “podcasting.” Oprah Winfrey’s video “podcast” is literally just the digital incarnation of the Oprah Winfrey Show. The episodes are video-first and even feature a full studio audience—something you almost never see for a traditional podcast, but a staple of the classic talk show format.

The show will still be available on YouTube, meaning Prime Video is growing its utility not exclusively through walled-garden exclusives, but by bringing disparate video services into one cohesive streaming environment. In some ways, Prime Video is acting similar to Roku, in that millions of people use it to manage and aggregate their other SVOD subscriptions.

I currently have no stock recommendation on Amazon, though I remain bullish on the entire digital video landscape. Prime Video, which I believe is significantly underappreciated by investors in the “streaming wars” discourse, has achieved substantial growth by aggressively leaning into free, ad-supported video.

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C) Spotify’s Fitness Push Highlights Its Audio-First Problem

I saw the Bloomberg report that Spotify Premium now includes Peloton classes, which I consider to be the music pioneer’s first major push into fitness content. This new partnership brings access to over 1,400 on-demand classes. Bloomberg quoted Roman Wasenmüller stating that they are expanding Spotify to become a wellness companion—a shift I find very interesting.

This deal is a distribution play for Peloton, which currently operates in only six countries; this partnership will expand its footprint to the majority of Spotify’s 180-plus markets. For Spotify, which boasts 290 million paid members and recently raised its US premium subscription to $13, it represents another attempt by co-CEOs Gustav Söderström and Alex Norström to add value beyond audio. Söderström noted the opportunity, stating that while people have always exercised to Spotify, “they never watched Spotify doing yoga in front of it”.

Today’s news is about Spotify striking yet another partnership in an attempt to expand outside of audio-only and become a more general entertainment media service. However, my point of view is that these partnerships with Peloton and others are simply not enough. Peloton as a company has struggled over recent years after the Covid-boom wore off. I am bearish on Spotify because audio-first companies have historically not been successful when trying to move up the value chain and expand into video and other broader interactive formats.

Spotify has spent years trying to make video happen, but it just hasn’t moved the needle. It’s tough to sell people on a video experience when you’ve already trained them to use your app for audio. History shows it’s much easier to start with video and move downstream—just look at YouTube. They’ve had way more success becoming a music destination than Spotify has had trying to be a video platform. YouTube Music is growing fast and is a massive driver for their overall business.

I think that Spotify, and other audio-first entertainment stocks, should be avoided for all of the above reasons.

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-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Let’s cue the record drop and get into this week’s cypher for the week ending April 26, 2026.

Before I dive in, a quick reminder: much of Accrued Interest’s investment content will soon be moving behind a paywall. Please subscribe today to ensure you don’t miss out on my ongoing TMT stock analysis, media industry commentary, and deep-dive financial breakdowns.

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Comcast’s Accelerating Cord-Cutting is a Blinking Red Light for Legacy Media

The Q1 2026 earnings report from Comcast confirmed that the ongoing loss of video subscribers has evolved from a lingering concern into a rapid, unyielding decline. Cord-cutting is accelerating far beyond investor expectations, with severe losses mounting on both an absolute and year-over-year basis.

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YouTube is Cleaning House While SiriusXM Sells Its Lowest-Tier Inventory

Digiday reported that YouTube is partnering with SiriusXM to monetize the massive volume of background audio listening currently left on the table. SiriusXM is set to act as the sales arm, aggregating audio inventory across YouTube’s podcast ecosystem. The initiative aims to capture value from users who treat the platform as an audio-first service, enabling advertisers to target high-intent listeners during background consumption—a behavior YouTube previously struggled to monetize on its own.

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Adobe’s $25 Billion Buyback is Strategy Subbing in for Substance

Adobe’s board authorized a $25 billion share buyback program through 2030, a move that follows the massive $15 billion authorization from early 2024. This signals a desperate pivot toward “return of capital” weeks after longtime CEO Shantanu Narayen’s exit. It represents roughly 23% of Adobe’s current market cap (~$110B)—a clear attempt to stem the bleeding of a stock that is down 27% YTD.

I am not as impressed by the buyback as some other value investors because I fundamentally believe that financial engineering is not a strategy. I do not have faith that Adobe can both spark organic growth (note that consensus revenue estimates are forecasting less than 10% YoY top-line growth between 2026 and the foreseeable future) and avoid being further disrupted by AI products.

For now, I am keeping Adobe in the “Too Hard” bucket. Avoid.

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Zaslav’s Exit and the Warner Bros-Paramount Fiction

We need to talk about Variety’s latest deep dive: “Inside David Zaslav’s $500 Million Warner Bros Exit After Paramount Sale.“ The piece relies heavily on quotes from corporate insiders to paint a picture of a company that was magically on the mend before the Paramount-Skydance (PSKY) acquisition.

WBD had real, systemic problems—a crushing debt load, a melting cable business, and the fumble of the NBA rights. A change in ownership doesn’t magically fix a broken balance sheet. Now that the bidding war is over and Paramount actually owns this asset, they have to run it. Given the premium paid and the underlying rot at WBD, I am highly pessimistic that PSKY can create any actual shareholder value here. Do not be fooled by the attempts at revisionist history. Paramount-Warner Bros. is still poised to underperform the S&P 500 over the medium and long-term.

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AI Tracking Employee Keystrokes Validates Meta Bull Case

Reuters reporting reveals Meta is actively installing tracking software to capture U.S. employees’ keystrokes, mouse movements, and screen snapshots. While the mainstream press is framing this as a corporate surveillance or privacy story, they are missing the massive financial signal. This internal data collection is training Meta’s AI agents to automate white-collar workflows. It is the definitive proof that Meta intends to execute headcount reductions far deeper than the rumored 20% cut. Management is aggressively swapping human payroll for AI infrastructure, ensuring their massive CapEx spend translates directly into margin expansion. Let me explain why this is very bullish news for Meta.

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A Melting Ice Cube on Trial: Breaking Down the Nexstar-TEGNA Injunction

If you have been following my coverage of the broadcast television sector, you know my ongoing bearish stance on Nexstar (NXST) and the broader broadcast M&A playbook. I have consistently warned that rolling up declining linear television assets with massive leverage is a flawed long-term strategy. Now, that strategy has hit a massive roadblock.

On Friday, April 17, 2026, the U.S. District Court for the Eastern District of California slammed the brakes on the $6.2 billion Nexstar-TEGNA megadeal by granting a preliminary injunction. In granting this injunction, the judge’s reasoning systematically exposes the structural flaws in the broadcast roll-up strategy. This ruling isn’t just a legal setback; it is a validation of the bear thesis that this industry is running out of runway.

Here are 5 key reasons why the antitrust risk in Nexstar is understated based on my read of the 52-page preliminary injunction…

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The Mispriced Victor: Why I’m Reaffirming My $120 Netflix Target

Netflix’s post-earnings -10% dip was a shortsighted mistake. While the Street panicked over “light” guidance, the fundamentals revealed strong pricing power: +16.2% YoY revenue growth achieved without a single tentpole release and despite wall-to-wall Winter Olympic competition. With 60% of sign-ups hitting the ad tier and an industry-low $0.48 cost-per-hour viewed, Netflix is effectively scaling the “unscalable.” From daytime share grabs via podcasts to programmatic ad growth, the undisputed victor of the streaming wars is just getting started. Subscribe to read my full Q1 2026 earnings breakdown.

Enjoy your Sunday. I look forward to more content this week!

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

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A) Comcast’s Accelerating Cord-Cutting is a Blinking Red Light for Legacy Media

Today’s Q1 2026 earnings report from Comcast confirms that the ongoing loss of video subscribers has evolved from a lingering concern into a rapid, unyielding decline. Cord-cutting is now accelerating far beyond investor expectations, with severe losses mounting on both an absolute and year-over-year basis.

The Floor Keeps Dropping on Video Subscribers

In the first three months of this year, Comcast shed another 322,000 video subscribers. They ended the period with just 10.95 million remaining subs, down from over 12 million a year ago. The year-over-year decline was approximately 8.75%, an unacceptably high rate for any business whose profits derive from the cable bundle.

In my experience, the market consistently attempts to find a floor for subscriber losses, perpetually hoping that the core audience of live sports fans and news junkies will stabilize the ship. But the reality of today’s earnings is that the floor keeps dropping as the legacy video bundle unravels at an accelerated pace. It is vital to reiterate that this is the structural collapse of the highest-margin product the entertainment industry has ever created.

Legacy Media CEOs Are Ignoring the Bleed at Their Own Peril

Monitoring Comcast’s subscriber drain is a necessary reality check for an industry in structural collapse. While CEOs at companies like Disney and Paramount Skydance project optimism regarding linear networks and affiliate fees, they are essentially hoping that investors ignore the decay of their primary distribution pipes. This dangerous smoke screen masks a subscriber erosion that diminishes programmer leverage when it comes time for carriage negotiations.

The Irony of YouTube TV Propping Up the Ecosystem

Counterintuitively, the only entity actually driving growth in the Pay-TV ecosystem right now with any consistency is Google. The growth in YouTube TV is accounting for almost all the life support keeping the broader Pay-TV ecosystem afloat. While legacy, asset-heavy providers like Comcast and Spectrum bleed hundreds of thousands of subscribers every single quarter, YouTube TV is quietly soaking up the most valuable, high-intent viewers who still want access to live sports and events.

YouTube has already won the battle for absolute watch time on the big screen in the living room, and now they are becoming the dominant gatekeeper for the bundle itself. Legacy media is trapped in a paradox where their biggest existential threat is also their only growing distributor.

I have no recommendation on Comcast, but will continue to use it as a bellwether for trends for media and entertainment stocks such as Disney, Paramount-WBD, Versant and Nexstar-Tegna.

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B) YouTube is Cleaning House While SiriusXM Sells Its Lowest-Tier Inventory

Pivoting to the digital side, Digiday reported that YouTube is partnering with SiriusXM to monetize the massive volume of background audio listening currently left on the table. SiriusXM will act as the sales arm, aggregating audio inventory across YouTube’s podcast ecosystem. The initiative aims to capture value from users who treat the platform as an audio-first service, enabling advertisers to target high-intent listeners during background consumption—a behavior YouTube previously struggled to monetize on its own.

Audio and Video Budgets Do Not Actually Compete

The report’s assessment of the audio market is consistent with my professional experience in Corporate Development and FP&A within the radio industry. Audio and video budgets operate in entirely different buckets with different buyers and return expectations.

The structural challenge for audio remains the disparity between engagement and revenue. As Digiday recently noted in their piece “YouTube is turning audio into an ad product — SiriusXM is selling it“, audio accounts for roughly 30% of media consumption time but attracts only about 4% of total ad spend. This gap isn’t an inefficiency that can be closed; it’s a direct reflection of value as perceived by the agencies writing the checks.

Reference: The Pokémon Theory of Media Investing

As I’ve previously argued in my article “The Pokémon Theory of Media Investing“, audio remains a low-attention medium that consistently under-indexes in budget allocation. Because it lacks the visual stopping power of social feeds or the premium CPMs of video, audio ads occupy a lower tier in the advertising hierarchy, a structural reality unlikely to be changed by simple outreach to advertisers.

Finding Spare Change in the Corporate Sofas

This is exactly why I view this new partnership as an interesting development, but not a strategic gamechanger. YouTube is fundamentally a video-first platform, and that reality is not going to change anytime soon. This deal is like YouTube is cleaning up their house and looking for spare change in-between the sofa cushions.

It is a smart operational move to outsource the sales of your lowest-tier inventory to a partner like SiriusXM, who already has the specialized sales force to peddle audio ads to the few buyers looking for them. But make no mistake, Google is not suddenly pivoting its core focus away from premium video and search to chase audio pennies.

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CONCLUSION

All this just reminds me why Google remains an Outperform and a core component driving the S&P 500 to new all-time highs. They have the luxury of outsourcing their lowest-margin inventory while maintaining an absolute stranglehold on the most lucrative segments of the digital advertising market. YouTube continues to cement its status as the number one media company in the world, and it shows absolutely no signs of slowing down.

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-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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A) Adobe’s $25 Billion Buyback is Strategy Subbing in for Substance

Adobe’s board just authorized a $25 billion share buyback program through 2030, a move that follows the massive $15 billion authorization from early 2024. This signals a desperate pivot toward “return of capital” just weeks after longtime CEO Shantanu Narayen’s exit. It represents roughly 23% of Adobe’s current market cap (~$110B)—a clear attempt to stem the bleeding of a stock that is down 27% YTD.

The “Agentic AI” Sales Pitch is a Distraction

To be fair, Adobe is touting a massive product evolution alongside the buyback. They are pitching “Agentic AI”—specifically the new Firefly AI Assistant—as a game-changer. They claim this conversational agent will execute multi-step workflows across the entire Creative Cloud (Photoshop, Premiere, Illustrator) from a single prompt. Furthermore, they are opening their ecosystem to third-party models (like Kling 3.0 and Nano Banana 2), arguing that Adobe will remain the essential “orchestrator” for professional creatives, regardless of which underlying model wins.

Valuation Does Not Equal Value

Adobe is arguably the cheapest large-cap TMT stock that has been on my radar, but I still cannot bring myself to rule it out as a value trap. At the current price of $255, it trades at 14x 2026 GAAP EPS of $18 and 12x 2027 GAAP EPS of $21.

I am not as impressed by the buyback as some other value investors because I fundamentally believe that financial engineering is not a strategy. I do not have faith that Adobe can both spark organic growth (note that consensus revenue estimates are forecasting less than 10% YoY top-line growth between 2026 and the foreseeable future) and avoid being further disrupted by AI products.

Adobe’s Orchestrator Moat is Evaporating

Bulls would counter and say that professionals still need to use Adobe products and that they can’t get by using competitors’ free versions. While I get their point that Adobe will ultimately use AI models made by others such as Gemini, I am worried that AI models are advancing so quickly that every year the threat will get bigger as these models become even more sophisticated.

From my experience, the only way to prove to the market that your stock is not a value trap is by demonstrating accelerating revenue growth. I have to pass on this stock—but good luck to any of the enterprising souls who want to try to catch a falling knife. In my opinion, life is too short to spend too much time on companies with middling growth rates.

For now, I am keeping Adobe in the “Too Hard” bucket. Avoid.

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B) Zaslav’s Exit and the Warner Bros-Paramount Fiction

We need to talk about Variety’s latest deep dive: “Inside David Zaslav’s $500 Million Warner Bros Exit After Paramount Sale.“ The piece relies heavily on quotes from corporate insiders to paint a picture of a company that was magically on the mend prior to the Paramount-Skydance (PSKY) acquisition.

Corporate Insiders are Never Neutral Narrators

Variety actually floats the claim that due to “recent internal momentum” and synergy realizations, WBD “did not need a savior” to step in. The article goes so far as to quote an unnamed executive stating that the linear TV decline had “bottomed out” and that Max’s international rollout was “weeks away from achieving dominant market share in LATAM.”

Let’s call Variety’s premise exactly what it is: preposterous. While articles like this written from corporate insiders’ perspectives go viral because of the palace intrigue nature, these employees are not neutral narrators, and they are flat-out wrong that WBD’s financial performance was on the verge of a turnaround.

An Objective Failure Rewarded by a Bidding War

The article frames Zaslav’s staggering $500 million exit package not as a bailout, but as a hard-earned reward for weathering the storm.

Let’s look at the actual tape. David Zaslav’s tenure at WBD was an objective failure by any real operational metric. The only saving grace of his run was that the stock jumped from $8 to $31 (deal price) after getting caught in the middle of a bidding war. One party, Paramount Skydance, was more than willing to overpay because they were buying the WBD asset as a political power move, not necessarily to make money.

A Pessimistic Outlook for the New Regime

WBD had real, systemic problems—a crushing debt load, a melting cable business, and the fumble of the NBA rights. A change in ownership doesn’t magically fix a broken balance sheet. Now that the bidding war is over and Paramount actually owns this asset, they have to run it. Given the premium paid and the underlying rot at WBD, I am highly pessimistic that PSKY can create any actual shareholder value here. Do not be fooled by the attempts at revisionist history. Paramount-Warner Bros. is still poised to underperform the S&P 500 over the medium and long-term.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Introduction: Ignoring the Privacy Noise to See the Margin Signal

If you want to understand where a trillion-dollar company is headed, you look at what the executives are doing to the business when they think Wall Street isn’t paying close attention.

Currently, the market is fixated on the headline sticker shock of Meta’s artificial intelligence ambitions. Investors are looking for validation that CEO Mark Zuckerberg is not blindly incinerating free cash flow in his pursuit of “AI superintelligence”.

Earlier today, Reuters reported on a drastic new internal policy at Meta: the company is actively installing tracking software on the computers of its U.S.-based employees to capture their keystrokes and mouse movements for AI training data.

For the average tech blogger, this is a story about corporate surveillance with the white-collar recession on everyone’s mind and the dystopian reality of Big Tech. But for value investors and those of us tracking Meta’s financial trajectory, this is a clear signpost. This news is the most concrete indication to date that Meta intends to utilize its proprietary AI to drive a structural headcount reduction that will far exceed the currently rumored 20% cut.

The Agent Transformation Accelerator: Automating the White-Collar Workflow

According to Reuters, Meta is rolling out a broad initiative to build AI agents capable of performing work tasks autonomously.

The internal tool, dubbed the Model Capability Initiative (MCI), will run in the background on work-related websites and applications. Reuters reports that MCI will track inputs like mouse movements, clicks, and keystrokes, and it will even take occasional snapshots of the content on employees’ screens to gather context.

The stated purpose of this exercise, revealed in internal memos, is to improve Meta’s AI models in areas where they currently struggle to replicate human-computer interaction, specifically tasks like “choosing from dropdown menus and using keyboard shortcuts“. The memo explicitly frames this as an employee contribution to the AI supercycle: “This is where all Meta employees can help our models get better simply by doing their daily work.”

This isn’t a rogue engineering project; it is an executive mandate coming straight from the top. Just a day prior, Meta CTO Andrew Bosworth informed the company that they would be accelerating internal data collection as part of an initiative recently rebranded as the Agent Transformation Accelerator (ATA). Bosworth connected these actions directly to the strategic shift toward AI-driven operational efficiency, noting that Meta would be “rigorous” about “building up data and evals for all the types of interactions we have as we go about our work.” Bosworth’s internal messaging perfectly mirrors the aggressive margin-expansion thesis we’ve been tracking here at Accrued Interest.

He stated: “The vision we are building towards is one where our agents primarily do the work and our role is to direct, review and help them improve.” He detailed the goal of creating “a closed loop” where these AI agents could “automatically see where we felt the need to intervene so they can be better next time.”

Meta spokesperson Andy Stone confirmed the MCI tool’s existence and purpose, acknowledging that the data will be fed directly into model training. Stone provided a highly revealing direct quote to Reuters regarding the necessity of this data capture:

“If we’re building agents to help people complete everyday tasks using computers, our models need real examples of how people actually use them — things like mouse movements, clicking buttons, and navigating dropdown menus. To help, we’re launching an internal tool that will capture these kinds of inputs on certain applications to help us train our models.”

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Reuters previously reported that intends to conduct a first wave of layoffs on May 20 this year. That initial round is expected to slice roughly 10% of Meta’s global workforce, equating to nearly 8,000 employees. Crucially, sources indicate that the company is actively planning further layoffs in the second half of 2026, though the exact size and dates of those subsequent cuts remain fluid as executives monitor the success of these AI capabilities.

The timeline is not a coincidence. Meta is capturing the current workflows of its employees right now, feeding those keystrokes and screen snapshots into the ATA models, preparing the AI agents to take over these processes just as the human operators are transitioned out of the business later this year.

How Keystrokes Translate to a $1,116 Share Price

In my recent deep dives, "Back to the EBITDA: Decoding Meta’s $1,116 Executive Playbook" and "Zuckerberg’s Middle-Age Metabolism: Trimming Fat to Fund Superintelligence", I reverse-engineered the newly issued SEC Form 4 filings tied to CFO Susan Li and the executive team. This news shows how those executives intend to get paid.

The executives only get rewarded if they hit a specific absolute price floor of $1,116.08 by February 2028. And the tranches extend all the way up to a staggering ceiling target of $3,727.12 per share.

To fund the $115 billion to $135 billion in AI capital expenditures without crushing their 42% operating margins, Meta has to aggressively swap human payroll and speculative hardware research for hard AI infrastructure. A 20% reduction in force was identified as a necessary baseline just to absorb the impending spike in data center depreciation.

However, the MCI tool is the crucial indicator that validates the true scale of what is to come. Mathematically, achieving those massive stock price targets laid out in the Form 4 filings requires operational leverage and cost-cutting that vastly exceeds a simple 20% baseline reduction.

A great value investor looks for operational clues rather than waiting for official company announcements. By the time a corporation formally announces cost savings, the market has already priced it into the stock.

Layoffs are incredibly tricky to manage due to their devastating impact on employee morale, meaning Meta cannot simply announce a 40% or 50% multi-year headcount reduction without breaking its internal culture.

The MCI tool proves they do not intend to make a grand announcement. They are quietly building a system to become a structurally leaner, more nimble company while revenue scales.

CONCLUSION

When you synthesize the executive compensation filings, the capital requirements, and the Model Capability Initiative, the picture is clear: Meta is monitoring and training AI on its own employees to maximize efficiencies.

We will be tracking Meta’s progress when the company reports Q1 earnings next Wednesday, April 29th, after the market closes. The true supercycle is just beginning.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Welcome back to Accrued Interest. If you have been following my coverage of the broadcast television sector, you know my ongoing bearish stance on Nexstar (NXST) and the broader broadcast M&A playbook. I have consistently warned that rolling up declining linear television assets with massive leverage is a flawed long-term strategy. Now, that strategy has hit a massive roadblock.

On Friday, April 17, 2026, the U.S. District Court for the Eastern District of California just slammed the brakes on the $6.2 billion Nexstar-TEGNA megadeal by granting a preliminary injunction. I wanted to give readers a fresh update first thing this Monday to help get you up to speed. In granting this injunction, the judge’s reasoning systematically exposes the structural flaws in the broadcast roll-up strategy. This ruling isn’t just a legal setback; it is a validation of the bear thesis that this industry is running out of runway. Nexstar stock is up today over +2% to about $206 per share. I think the fundamentals have not changed for the better.

Here are 5 key reasons why the antitrust risk in Nexstar is understated based on my read of the 52-page preliminary injunction…

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Key Point 1: The court firmly rejected the broadcaster narrative that streaming services are a viable substitute for Big Four networks.

Broadcasters love to tell Wall Street their consolidation is justified because they are fiercely competing against digital streaming giants. However, the court saw right through this argument, defining the relevant product market strictly as Big Four broadcast retransmission licenses.

• The court found that customers do not consider streaming services to be reasonable substitutes for Big Four broadcast stations.

• Consumers must still get Big Four content primarily from multichannel video programming distributors (MVPDs) as part of their cable packages, explicitly noting that “customers cannot get Big Four station content from any streaming services”.

• Even when an MVPD like DIRECTV has an arrangement with a streaming service like Peacock, they act “only as a sales agent of Peacock, which is not a reasonable substitute” and cannot integrate the content into their own service.
  

• Live television content available from virtual MVPDs (like YouTube TV or Hulu+ Live TV) is “more limited, less consistent, and less localized than the content that is available through an MVPD subscriber’s unlimited access to all Big [Four] stations”.

This destroys the narrative that legacy broadcasters have a natural pivot to digital. By recognizing that streaming is not a true substitute for local broadcast, the court highlighted that Nexstar’s core linear business is isolated. They are managing a melting ice cube that lacks a digital parachute, leaving them completely dependent on a shrinking pool of traditional pay-TV subscribers.

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Key Point 2: Creating new local duopolies drastically shifts blackout leverage to Nexstar, harming distributors and consumers.

Nexstar’s financial engineering relies heavily on using market concentration to force MVPDs into paying exorbitant retransmission fees. The court explicitly outlined how dangerous this leverage becomes when a single company controls multiple major networks in one city.

• The acquisition would give Nexstar control of additional Big Four stations in 31 local markets where it already owns at least one Big Four affiliate, “including 27 new duopolies and 3 new triopolies”.
  

• The court noted that owning multiple Big Four affiliates in a single local market makes Nexstar’s blackout threats significantly more coercive.
  

• If Nexstar initiates a blackout in these overlapping markets, “any MVPD that refuses Nexstar’s demands will risk leaving its subscribers in that area without multiple sources of live sports and local news,” making them more likely to drop their current provider.
  

• By making blackouts more painful for distributors like DIRECTV, the merger effectively makes it harder for them to resist Nexstar’s demands for higher retransmission prices.
  

• Economically, the merger drastically increases market concentration. In the 31 overlap markets, the post-merger Herfindahl-Hirschman Index (HHI) would range from 3,361 to 7,422, far exceeding the threshold for a highly concentrated market which is anything above 2,500.
  

Nexstar’s entire M&A model is built on forcing retransmission hikes to cover massive debt loads. If antitrust regulators and federal courts prevent them from creating these artificial leverage points (duopolies and triopolies), their ability to drive top-line revenue stalls out. Without the threat of localized blackouts, Nexstar loses its pricing power.

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Key Point 3: “Synergies” is just corporate speak for gutting local newsrooms and degrading product quality.

When broadcast executives promise investors hundreds of millions in “synergies,” they are really talking about slashing payroll and centralizing operations. The court found this directly harmed the quality of the product being sold to the public.

• The court reviewed studies showing that achieving “economies of scale” in broadcast consolidation directly leads to “text reuse,” which is the duplication of the exact same news material across different broadcasts.
  

• As fewer station groups control the local television ecosystem, this content duplication becomes easier, and “opportunities for local journalism decrease”.
  

• Testimony from the NewsGuild-CWA president confirmed that consolidation does not create a better local news ecosystem, but rather “results in downsizing and fewer journalists doing the work of reporting the news”.
  

• The court found “no reason to believe Nexstar will deviate from its historical pattern of newsroom consolidation” from two into one, thereby reducing the quality of local news programming.

Gutting the core product to service debt is a short-term financial trick, not a sustainable business strategy. Degraded, homogenized local news will inevitably push even more viewers toward digital alternatives. You cannot shrink your way to long-term growth.

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Key Point 4: Regulatory clearance from the FCC does not grant broadcasters immunity from federal antitrust law.

A major pillar of Nexstar’s bull case has been their ability to lobby the FCC for favorable regulatory waivers. However, the federal court made it clear that administrative goodwill does not bypass the Clayton Act.

• Defendants attempted to argue that the injunction would conflict with the FCC Order that cleared the transaction.
  

• The court explicitly rejected this defense, stating that “the FCC was ‘not given the power to decide antitrust issues’”.
  

• The judge noted that FCC action “’was not intended to prevent enforcement of the antitrust laws in federal courts’”.
  

• The court concluded that “A court order to enforce antitrust laws, therefore, would not undermine congressional intent in regulation of the broadcast industry”.

This is a blow to the broadcast rollup playbook. It proves that political cover and FCC administrative maneuvering cannot shield a fundamentally anticompetitive rollup strategy from standard antitrust scrutiny. This severely caps Nexstar’s future M&A runway, regardless of who sits in the FCC Chairman’s seat.

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Key Point 5: Allowing Nexstar and TEGNA to integrate before a full trial would cause immediate and irreversible damage.

Finally, the court recognized the structural mechanics of how broadcast integration works, ruling that the companies must remain totally separate while litigation plays out.

• The court found that allowing further integration of Nexstar and TEGNA constitutes “immediate, irreparable harm”.
  

• Defendants argued that “divestiture would still be a viable remedy after a trial” if the companies were allowed to integrate now.
  

• The court disagreed, finding that “integration efforts are exactly those that would make it more difficult to divest TEGNA as a competitive entity and will result in newsroom layoffs and shutdowns”.
  

• Because “the merger, or particular aspects of the merger, [cannot] be undone” once executed, the injury to the market is immediate, justifying the halt.

This traps Nexstar in operational purgatory. They face the financial burden, legal expenses, and massive distraction of a stalled multi-billion dollar transaction without being able to extract a single dollar of the “synergies” needed to justify it. When your underlying business is a melting ice cube, time is your absolute worst enemy.

CONCLUSION

Even if we assume the Nexstar and TEGNA deal ultimately closes, the broader reality of this industry remains unchanged: Nexstar’s core business is in secular decline. Rolling up declining TV stations is a highly leveraged game of musical chairs, and cord-cutting is quickly pulling chairs off the floor.

Because of these structural headwinds, I maintain my Underperform rating on Nexstar stock (NXST). If you are looking for guaranteed media bets that will actually generate organic growth over the next five years, you have to look outside the traditional cable bundle. Netflix and YouTube (through Google) are the only guaranteed media bets for growth as they continue to capture the viewership that legacy linear television is shedding.

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-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Introduction

Look, the market hated Netflix’s Q1 earnings, sending the stock down 10% after hours. Investors are spooked by soft guidance and Reed Hastings stepping down, but I think they’re missing the forest for the trees. This dip feels like a classic short-term overreaction to a company that is still fundamentally miles ahead of all its competitors, except for YouTube.

The monetization engine is humming. Revenue hit $12.25 billion, up 16.2% year-over-year (14% on a FX-neutral basis), with a fat 32.3% operating margin. That’s solid. I’m staying positive here—Netflix still has plenty of room to run.

The Post-Earnings Selloff Misses Netflix’s Underlying Resilience

The post-earnings selloff was primarily driven by two bearish talking points. First, Q2 revenue growth guidance of +13.5% YoY came in slightly weaker than what some investors were expecting. Second, the announcement that founder and board member Reed Hastings is stepping down gave others an excuse to hit the sell button.

What this selloff overlooks is Netflix’s impressive growth despite significant headwinds. Achieving a 16.2% revenue increase during a relatively light content cycle is a testament to its scale. NFLX maintained stable engagement per household even while competing against major global events like the Winter Olympics. A platform that can drive mid-teens growth during quieter periods demonstrates a level of pricing power that provides a substantial buffer against broader industry shifts.

The Ad Tier Strategy is Working

While some may look for higher growth rates, Netflix’s projected 12% to 14% full-year 2026 revenue growth remains healthy. Management appears to be using pricing strategically to maintain low churn across premium tiers. Currently, the priority seems to be growing engagement within the advertising tier to diversify revenue streams.

A key indicator is that Netflix said over 60% of new sign-ups in available markets are opting for the ad tier. Priced at $8.99 in the United States, this provides an accessible entry point. While this may impact short-term average revenue per user (ARPU), it helps build a larger user base for future monetization. Management indicates that ad revenue is expected to grow significantly, reaching approximately $3 billion by 2026.

Netflix’s Inherent Advertising Technology Advantage

Netflix said on the earnings call that it increased its advertiser base by 70% year-over-year, now partnering with over 4,000 advertisers. This represents a growing footprint in the digital advertising market with potential for further scaling.

By moving to sell 50% of its non-live ad inventory programmatically, Netflix is seeking greater efficiency and scalability. This technological approach to ad sales contributes to the company’s competitive operating margins compared to traditional media networks dealing with legacy structures. This is another thing I think investors miss when they only think of a spreadsheet. If you think about all the people needed to operate a global Ad sales business, it will be inherently more expensive, and less scalable than what Netflix is currently building.

Video podcasts represent a calculated daytime share grab

Skeptics might view the platform’s push into video podcasts as a distraction from prestige television, but it is a highly calculated, smart maneuver. The strategy targets daytime viewing hours—a daypart where Netflix has historically underindexed. This is a key way to take share from traditional television, especially as U.S. broadcast networks continually pull back budgets and abandon the daytime talk show format.

Just look at the graveyard of syndicated daytime hits lately: Access Hollywood, canceled after 30 years, The Steve Wilkos Show, wrapped its final 19-season run, The Kelly Clarkson Show, ending its run later this year, among others.

During the earnings call, management emphasized that podcasts are naturally driving increased engagement on mobile devices. With Netflix currently holding only a 5% share of global TV viewing and reaching less than 45% of its 800 million addressable broadband households, video podcasts serve as a strategic tool to widen its moat and capture a larger slice of the total addressable market.

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A highly targeted sports strategy is proving to be efficient

Netflix’s live sports strategy is proving to be highly efficient and regionally targeted. Management highlighted how the World Baseball Classic in Japan helped drive substantial viewing hours, proving the company can successfully execute large regional events outside the United States. Co-CEO Ted Sarandos specifically noted this event, stating that the company is “adding more regional live sports events, like the incredible event we just did in Japan with the World Baseball Classic“.

Further validating this model, earlier this week it was reported that Netflix secured the rights to the CONCACAF soccer tournament for Mexico. Momentum is also building for their coverage of the 2027 Women’s World Cup, which serves as another prime example of this highly efficient, targeted sports model in action.

The anchor service boasts the ultimate value proposition in streaming

On the call, NFLX drove home a point that I think too many investors overlook - Netflix is the only global streaming service with a value proposition. When you rank the streaming landscape on a cost-per-hour-watched basis, Netflix remains the cheapest major service on the market.

Co-CEO Greg Peters on pricing advantage: “In the U.S. right now, Netflix subscribers are paying the least per hour of viewing compared to other SVOD offerings. So in some cases, you’d have to pay 2x per hour to get a competitive service.”

Management is not exaggerating here - outside estimates from different analysts have also been pointing out Netflix’s quiet cost advantage. As reported by Variety - According to MoffettNathanson’s estimates, Netflix delivers the best bang for the buck in the cohort, pulling in just $0.48 per hour viewed. This is significantly lower than Disney (Disney+ and Hulu), Peacock, HBO Max, or Paramount+, which range from $0.64 to $0.93 per hour viewed.

Even with recent and upcoming price increases, Netflix will maintain a sector-low metric in the roughly $0.50-per-hour range. MoffettNathanson estimated that “Netflix delivers significant value to its subscribers that has room to be better monetized over time.”

Now while I do not have a copy of the MoffettNathanson report from 2026, I was able to find a similar analysis done by UBS from last year that came to the same conclusions. Back in Jan 2025, Business Insider covered this same concept in their article - “Netflix is raising prices again. These charts show why.” For context - back in early 2025 NFLX raised the U.S. price of a standard plan to $18 a month, up from $15.50, and its ad-supported plan to $8 from $7. The article cited a note from the UBS media analyst John Hodulik which also said Netflix was “by far the cheapest service on a per-hour-of-consumption basis,”

UBS Jan 2025 Estimates - Cost Per Hour Watched (Ad-Free Plans)

Jan 2025: “Before Tuesday’s increase, customers on Netflix’s ad-free plan paid an average of $0.33 a month per hour they watched, a UBS analysis of Nielsen and company data found. That suggests the average customer is watching the service for a staggering 47 to 70 hours a month. That’s cheaper on a per-hour basis than Netflix’s major streaming rivals and traditional TV, UBS found.”

This unbeatable value proposition ensures Netflix will remain the “anchor streaming service”—the default utility people keep while selectively churning through the rest of the pack.

Q1 was a highly solid quarter that demonstrated consistent execution.

Netflix is showing tangible signs of an improving monetization engine that continues to expand its economic moat into new dayparts and targeted live events. The broader industry narrative is playing out exactly as predicted. Each year, it becomes increasingly clear that the streaming landscape is a two-horse race between YouTube and Netflix, and then everyone else.

I’m staying bullish, but I understand why the stock took a pause after a strong run up to $108 per share. It is going to take time for Netflix’s ad engine to get fully ramped up, but as value investors, we should focus on the fundamentals, which are simply too strong to ignore. Forget the short-term noise—Netflix’s profitability and market share make it the clear long-term winner. I’m maintaining my $120 price target, which represents approximately 30x 2027 GAAP EPS of $4 per share.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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A) Google Trades Principles for Pentagon Billions

The era of “Don’t Be Evil” is officially dead and buried. According to The Information today, Google is currently in discussions with the Defense Department over a classified AI deal. This represents a massive, calculated reversal from 2018, when massive internal employee outcry forced the company to withdraw from the military’s Project Maven. Google is now aggressively going after growth wherever they can find it, completely regardless of their past principles.

Google has spent years rebuilding its relationship with the Pentagon, even setting up a dedicated Public Sector division in 2022 staffed with military veterans and former government contractors. This unit is not just a side project. They have a strategic plan to grow bookings to roughly $6 billion over a three-year period through 2027, with $2 billion of that specifically accounted for by defense contracts. The culture inside this unit is so distinct that members have reportedly coined the nickname “Big Google” for the rest of the company to maintain a sense of separateness and shield their work from the scrutiny of activist employees.

Google is also moving to ensure its hardware is ready for the front lines. The company’s secure cloud product, Google Distributed Cloud, has been accredited for classified work, and discussions are now focused on adding racks of graphics processing units to run Google’s specialized tensor processing units—its specialized chips—for the first time in classified environments. This aggressive pursuit of military dollars was signaled internally when Google quietly removed explicit provisions against using AI for weapons and surveillance from its principles early last year. As one attendee noted, the move was perceived as a “green light” for the public sector team to finally chase a wider array of lethal deals.

This strategy stands in stark contrast to Anthropic’s current predicament. The Pentagon recently declared Anthropic a “supply chain risk” and effectively excluded them from new military contracts after CEO Dario Amodei refused to drop safety safeguards that prohibited the use of their AI for mass domestic surveillance and fully autonomous lethal weapons. While Anthropic is suing the Pentagon over this designation, Google has successfully capitalized on the resulting hostility toward the startup. By removing its own safety-first ban provisions, Google has positioned itself as the more compliant, and therefore more profitable, partner for a Defense Department that is increasingly impatient with “agentic” ethical concerns.

My view on this is pure realpolitik. The President’s second-term reality is that defense spending is going to be rising, and Google is positioning its public sector team to capture those billions. I remain bullish on Google stock because its services are so indispensable that the company acts as a toll-collector for the entire internet. As I laid out in my previous article on the Pokemon Theory of Media Investing, Google has a Tier-S business model. Working with them is simply inevitable, no matter how much they pivot their ethical framework. Google remains an Outperform, and at $338 per share, the stock is up about 8% YTD.

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B) The Conversion Pixel Exposes OpenAI’s Desperate Search for Margins

As I have discussed before, OpenAI is racing to transform themselves into an ad-selling machine. It was reported by Digiday, that the company is actively building the measurement layer required to prove their ads actually work, specifically testing a JavaScript conversion tracking pixel that fires when a ChatGPT user clicks an ad and completes an action on an advertiser’s site, like a registration or a purchase. They are rolling out a self-serve ads manager to replace their rudimentary insertion orders, and they are expanding their programmatic inventory through partnerships with ad-tech platforms like StackAdapt, Criteo, and Smartly.

In AdAge today, they reported that advertiser reactions to this rollout have been characterized by a mix of curiosity and skepticism. While early data suggests high engagement rates—with clicks on par with “brand search” on Google—media buyers still view the channel as largely experimental. The shift from OpenAI’s initial demand for premium $60 CPMs to the current “crude auction” environment is a clear signal that they are struggling to maintain pricing power. Agencies are currently seeing rates drop as low as $15 to $25 in less competitive categories, and many have barely been able to spend their initial commitments because there is simply not enough inventory yet. To combat this, OpenAI has slashed the minimum spending threshold to enter the pilot from the original $200,000–$250,000 range down to just $50,000, a move agencies see as a necessary step to lure in more experimental budgets and prove the platform’s viability.

The economics behind this pivot reveal a company scrambling for cash. OpenAI is projected to lose $14 billion this year alone, making them chase any revenue stream that can support the top line. My read on this situation is that OpenAI has absolutely no choice but to follow the same self-serve playbook written by Meta and Google. The compute costs associated with continuous, agentic AI are astronomically high. You simply cannot fund a global superintelligence infrastructure on $20 monthly consumer subscriptions. They need billions in ad revenue, and they need it immediately.

However, even with this aggressive shift toward performance-based advertising, OpenAI’s goal of hitting $100 billion in ad revenue by 2030 remains fundamentally unrealistic. As I argued in my previous update on April 9th, “Meta’s Muse Spark Rollout, OpenAI’s $100B Ad Dreams, and Uber’s Latest Robotaxi Deal (Accrued Interest Update 4-9-2026),” such a target would require OpenAI to capture roughly 8% of the entire global digital ad market in record time—a feat that assumes established giants like Google and Meta will simply stand still while their high-intent search and social budgets are cannibalized.

I cannot wait for OpenAI to finally go public, hopefully this year, so we can all better benchmark them against Meta and Google.

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C) Roku Hits 100 Million and Opens the Advertising Floodgates

Roku officially surpassed the 100 million streaming user milestone worldwide this week, a figure they announced via a pre-earnings press release to highlight their massive scale and momentum. They remain the number one TV streaming platform in the U.S., Canada, and Mexico by hours streamed. Alongside this massive scale, they recently expanded their value-focused offerings with the launch of Howdy, a low-cost, $3 per month ad-free subscription service. On a personal note, readers can expect more Roku coverage in the coming months. Now that I have officially dropped coverage of Fubo TV, I will be reallocating that bandwidth toward the San Jose-based streaming leader. (FYI - Please let me know in the comments if there are any publicly traded TMT companies you want to hear more about.)

Big picture - this 100 million mark is meaningful because it acts as a proxy for close to full distribution in North America. Hitting this milestone tells marketers that the Roku platform can reach almost every single home. This critical scale opens Roku up to more brand-focused advertisers who previously relied on legacy linear television to reach a nationwide audience. According to Comscore data, Roku already drives more than three times the engagement of the next leading TV operating system in the U.S., making its home screen the undisputed starting point for how a massive portion of the population discovers TV.

Roku currently trades at about $110 per share, up about 2% YTD. While I am very optimistic about the company’s strategic positioning, the stock is not exactly cheap. Trading at roughly 34x 2027 GAAP EPS, I believe this is a fair multiple that has a good amount of this positive news already priced in. More to come on Roku.

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Tonight kicks off the start of Q1 2026 earnings season here on Accrued Interest. Netflix earnings are coming out today right after the bell. I will be reviewing the earnings results and the conference call tonight, and I encourage readers to check back for a full update once I’ve had time to digest the print. Subscribe to Accrued Interest now so you receive my updated Netflix take the moment I publish it. You can read my last NFLX deep-dive here, Why Netflix is a $120 Stock.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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A) Disney’s Marketing Layoffs Signal a Necessary Corporate Diet

The honeymoon phase is officially over for Josh D’Amaro. Just a month into his tenure as Disney’s new CEO, D’Amaro has confirmed that the company is eliminating roughly 1,000 jobs. The cuts are primarily targeting the company’s newly streamlined marketing and brand organization, but they are also hitting several entire divisions of publicity, Marvel, and home entertainment. Back in January, Disney made a massive show of elevating veteran executive Asad Ayaz to Chief Marketing and Brand Officer, ostensibly to unify their sprawling marketing apparatus. In hindsight, it looks incredibly obvious to me that Disney was not actually expanding its marketing efforts, but rather executing a massive reorganization for what was ultimately going to be a prime area for cuts.

If you want proof, just look at the specifics of who is being shown the door. Disney is completely wiping out its entire home entertainment team, which was led by Chris Bess, as well as its EPK team, including director of creative content Natalie Clunis. The digital marketing side is experiencing an absolute bloodbath across every level. They let go of Dustin Sandoval, a 16-year veteran of the company who was one of Ayaz’s key lieutenants and oversaw massive digital campaigns for hits like “Avengers: Endgame”. They also dismissed Steve Nuchols, who handled print campaigns for almost every Disney movie over the past 25 years, and Theresa Helmer, who ran YouTube and brand campaigns. Marvel is feeling the squeeze as well, with layoffs hitting employees in Burbank and New York across film and television production, comics, franchise, finance, and legal. While Disney disputed rumors that 8% of Marvel was cut, claiming the number is “much smaller,” sources clearly point to this being the result of a necessary reduction in Marvel’s artificially inflated production slate from the peak of the Disney+ era.

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My angle here is simple. Yes, these 1,000 jobs are a relatively small proportion of a global workforce that stood at over 230,000 employees at the end of their last fiscal year. However, this move sends a key, undeniable message: Disney Corporate is aggressively looking for cost efficiencies to start out the new CEO’s tenure. I know from my own experience that new CEOs often want to make immediate changes to leave their mark. These cuts are widely understood to be necessary for a business that is fundamentally stronger than its harshest critics want to admit, but it is also decidedly not in a growth phase where investors are willing to simply look past corporate bloat. Everyone in the market knows the linear television business is in a secular decline. But I do not think people fully realize that when your core business is in a secular decline, the company will always be in the ongoing process of making cuts.

I have been structurally bearish on Disney in my past Accrued Interest writings. Back in December, during my 12 Days of Pitch-Mas series, I explicitly stated that Disney would underperform the broader market until they finally made the tough choice to cleave off and separate their linear TV assets and ESPN from the rest of the enterprise. Through April 15th, with the stock trading at $102 per share, Disney is down -10% year-to-date and is heavily trailing the S&P 500. The stock currently trades at approximately 17.5x 2026 GAAP EPS and about 16x 2027 earnings. I fully expect this underperformance to continue until management makes much larger strategic moves.

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B) Uber’s Robotaxi Bets Widen an Indispensable Moat

Over in the electric vehicle sector, Lucid is trying to manufacture a turnaround, and Uber is footing a massive part of the bill. Lucid just announced a slate of major updates, including naming Silvio Napoli, the former head of Switzerland’s Schindler Group, as its new CEO. Alongside the leadership change, Lucid has secured a fresh $750 million in capital. Saudi Arabia’s Public Investment Fund is injecting $550 million, while Uber is doubling down with another $200 million, bringing their total investment in the EV maker to $500 million.

Under this funding deal, Uber and Lucid are aggressively expanding their robotaxi partnership. The companies originally agreed last summer to deploy at least 20,000 Lucid Gravity SUVs equipped with Nuro’s self-driving technology. That commitment has now exploded to at least 35,000 total vehicles, which will also include Lucid’s upcoming mass-market midsize platform.

What is really catching my eye, however, is that Lucid, Uber, and Nuro are quietly moving out of the purely theoretical testing phase and into real-world deployment. For now, only Uber employees can request these autonomous rides, but the rubber is officially meeting the road. Uber has also begun early test rides of these Gravity SUV robotaxis in the San Francisco Bay Area this month utilizing safety drivers.

I want to remind readers that I remain incredibly bullish on Uber, as I laid out in my Accrued Interest Update back on April 9th where we discussed their deal-making strategy. This Lucid agreement is exactly why. Uber is making absolutely certain that they are deeply partnered with basically everyone developing self-driving cars, with the glaring exception of Tesla. This strategy will guarantee that Uber becomes an indispensable, foundational part of global transportation infrastructure going forward. While skeptical investors often look at these massive partnerships as cash simply going out the door, I view them as critical, highly strategic investments that are permanently widening the company’s moat.

Looking at the tape, Uber stock is currently sitting at $73 per share. I rate Uber as an Outperform, but the stock is currently down -11% year-to-date. I do not think Uber stock is going to truly take off until management can show strong, undeniable revenue growth to investors, so I expect the stock’s performance to be somewhat muted until earnings. Uber is trading at 21x 2026 GAAP EPS, but a much more reasonable 16.7x 2027 earnings. This is a value stock, and I am stubbornly sticking with it.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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A) Gulf Capital Cannot Save Paramount

The details behind the financing of the massive Paramount Skydance and Warner Bros. Discovery merger are finally coming to light, and it should not come as a surprise if you have been following my coverage here on Accrued Interest. According to a recent cover story by The Hollywood Reporter, Saudi Arabia and other Gulf states are pouring billions into the Ellisons’ takeover, with sovereign wealth funds from the region contributing around $24 billion to the deal. Saudi Arabia’s Public Investment Fund alone is putting up approximately $12 billion of that total. This represents an incredible shift in how Hollywood is being bankrolled, but if you look past the sheer dollar amounts, the motivations become incredibly clear.

This is not simply a soft-power play designed to rebrand the image of the Kingdom in the West. As The Hollywood Reporter’s deep dive into the transaction highlights, this strategy is ultimately about courting political influence in Washington and giving a young, restless domestic population “bread and circuses” to distract them from political participation and human rights concerns. The benefit of having this foreign money backstopping the new media conglomerate is that these sovereign funds ultimately do not care about the day-to-day stock price. I have long suspected this was the case, and the recent reporting makes it explicitly clear: they are there for the power, the proximity to American media infrastructure, and the political influence.

However, the public is absolutely right to be concerned about these developments. American viewers deserve to know exactly what entities are funding and controlling the media they watch, particularly when it comes to vital news organizations like CNN and CBS News. Despite these looming regulatory and political vulnerabilities, I am not banking on the new PSKY/WBD being broken up if there is a shift to a different presidential administration in the upcoming years. For now, my base case is that the combined company continues exactly as it is.

Foreign Capital Cannot Overcome Shifting Audience Trends

But structurally, PSKY is deeply troubled. As I have said elsewhere on Accrued Interest, financial engineering and sovereign wealth cannot force viewers to tune in. The audience ultimately decides who wins. No matter how many billions the Saudis or other wealthy investors pump into this legacy portfolio, audience trends are rapidly and permanently moving away from the linear content that PSKY and WBD rely on, shifting heavily toward Netflix and user-generated content on YouTube. They are outgunned in the streaming wars, and a massive war chest of foreign capital cannot reverse a secular decline.

Relevant Accrued Interest articles on and :

2026.04: CBS Rents Out Late-Night, Netflix’s Danny Go! Distribution (Accrued Interest Update 4-7-2026)

2026.03: Dead on Arrival: 8 Reasons the Paramount-WBD Merger Will Fail

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B) David Einhorn’s Versant Thesis Ignores the 2028 Cliff

Over in the value investing world, the first-quarter letters are starting to drop, and I noticed that David Einhorn’s Greenlight Capital has initiated a new, medium-sized position in Versant. (I must explicitly state here that I have not yet obtained a full digital copy of David Einhorn’s Greenlight Capital letter, so if any readers have one floating around their inbox, please send a digital copy my way!) Greenlight’s stated rationale is that while the legacy cable business is facing ongoing cord-cutting, over 60% percent of Versant’s programming is tied to live news and events. In their view, this makes the portfolio much more resistant to subscriber losses than general entertainment networks.

I strongly disagree with Greenlight’s thesis here. If you truly believe that news and sports are core to the Versant investment case, then you should be extra concerned about their impending separation from the NBC Universal family. As I detailed during my recent appearance on the Yet Another Value Podcast, Versant’s financials are currently over-earning because they operate under the protective halo of the NBC ad sales department. Their sports portfolio is essentially a collection of leftover rights that NBC did not have room for on its main broadcast network. When that umbilical cord is permanently cut in 2028, Versant is going to lose immense leverage in carriage negotiations with pay-TV providers, and their sports rights are going to be severely devalued on the open market.

I admit that I was genuinely surprised to see Versant’s stock rally recently, currently trading back up around $41 per share. When I originally pitched the stock as an underperform, it was trading around $34 and was suffering from a wave of forced, indiscriminate selling. It looks very much like Einhorn, and I would assume a few others, stepped in to buy this as a deep value or special situations play.

The reality is that the stock looks optically cheap based on 2026 and 2027 estimates, but the massive risk waiting in 2028 has not disappeared. I am perfectly fine if the broader market does not agree with me in the short or medium term. At the end of the day, I will stick to my analytical process and point out exactly where a company’s true earnings power is headed, regardless of who is buying the stock today.

Relevant Accrued Interest articles on and :

2026.03: Interview: Yet Another Value Podcast and the Shifting Media Landscape

2026.01: Is Versant (VSNT) Worth More Dead Than Alive?

2026.01: Is Versant (VSNT) Cheap or Just Cheaply Valued? The Case for $27

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C) Nielsen’s Delayed Gauge Report Reveals Industry Paranoia

Nielsen is finally out with their latest Gauge report covering February 2026 TV viewership, and I will be doing a full, rigorous deep dive on this data just as I have in the past with my monthly series. Before we look at the numbers, you have to understand the drama behind the delay. Nielsen was originally supposed to release this report weeks ago, incorporating new data from the Advertising Research Foundation (DASH) to better track how households actually consume digital video. However, when clients realized this new methodology was going to show a sharper-than-expected decline for streaming view share—and a bump for legacy broadcast and cable—there was an industry uproar. Rather than stand by the new data, Nielsen caved to the complaints of tech giants and streamers, pausing the methodological updates until the fall to “minimize trend breaks”.

As for the actual takeaways using the old methodology, February was completely dominated by live events. Unsurprisingly, the Super Bowl and the Milan Cortina Winter Olympics were massive windfalls for NBCUniversal and Versant. The two companies combined for 13.1% of all TV viewing, officially dethroning YouTube to take the top spot on the Media Distributor Gauge. Over on the streaming side, Peacock had an astronomical month, jumping 64% in viewership to capture a record 3% share of all TV time, heavily driven by its simulcast of the Super Bowl.

Relevant Accrued Interest articles on Nielsen / TV viewing trends:

2026.02: Media Stock Insights from Nielsen’s Jan-26 TV Snapshot

2026.01: Media Stock Insights from Nielsen’s Dec-25 TV Snapshot

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

Please subscribe to read the rest of the Accrued Interest Daily Update - for April 13, 2026.

Before I dive in, a quick reminder: Accrued Interest’s daily updates will soon be moving behind a paywall. Please subscribe today to ensure you don’t miss out on my ongoing TMT stock analysis, media industry commentary and deep-dive financial breakdowns.

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A) Nexstar’s Desperate Dash for Broadcast Consolidation Hits a Legal Wall

The long-simmering acquisition of TEGNA by Nexstar has officially hit a brick wall. Thanks to a fresh wave of lawsuits from opponents fighting the merger, the deal’s closing is now paused. A federal judge recently stepped in to extend and modify a restraining order, effectively putting this multi-billion dollar tie-up on ice. The court’s decision gives necessary breathing room to advocacy groups and pay-TV operators who have been fiercely arguing that the merger violates antitrust principles, threatens to illegally inflate retransmission consent fees, and will ultimately crush local journalism. The sheer volume of these legal challenges has dragged what executives hoped would be a swift integration into a prolonged, messy courtroom slugfest.

But looking at the bigger picture, it is incredibly obvious to me that Nexstar, along with the rest of the broadcast media sector, is aggressively using its political leverage over the current U.S. administration to artificially shape the market in its favor. You only have to look at FCC Chairman Brendan Carr, who has been openly vocal in a way none of his predecessors ever dared to be. Carr clearly wants to interpret the law to explicitly benefit massive broadcast conglomerates like Nexstar and Sinclair.

I believe they are rushing to close this merger and integrate the assets as quickly as humanly possible, entirely driven by the fear of a potential shift to a Democratic administration following the 2026 midterm elections and beyond.

Broadcast Consolidation is a Desperate Cash Grab, Not a Public Benefit

The broadcasters love to complain that they need this consolidation to compete with “big tech.” I do not buy that argument for a second. The opponents of this deal are absolutely correct: this level of consolidation will inevitably result in significantly less local news and far fewer independent voices. This is purely an economic move designed to extract higher retransmission fees and slash local newsroom costs, not a public benefit. And I think regulators need a serious reminder that these companies operate using public airwaves.

I remain structurally bearish on broadcast television and Nexstar. Looking at the tape, Nexstar stock is currently trading at $183 per share, which is down almost 10% year-to-date and completely trailing the S&P 500. I firmly believe the company is likely to underperform the broader market whether or not they manage to drag this deal across the finish line. Stay tuned, because I have another deep dive coming that lays out all the twists and turns of this saga since I originally pitched the stock as an underperform on the Business Breakdowns podcast back in 2025.

Relevant Accrued Interest articles on and :

2025.12.15: Nexstar + Tegna: Capped Upside and Regulatory Risk ($NXST)

2025.06.25: Interview – Nexstar Media Group: Broadcasting’s Biggest Bet ($NXST)

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B) Meta’s AI CEO Clone Signals a Ruthless Corporate Diet

Over in Silicon Valley, the news just broke that Meta is actively building an artificial intelligence version of Mark Zuckerberg to interact directly with staff. The company is training this photorealistic, animated AI on Zuckerberg’s mannerisms, voice, and strategic thinking so that employees can theoretically get direct feedback and direction from the “CEO” at any time.

According to the recent Financial Times article, this isn’t just some quirky internal chatbot. Meta has reportedly dedicated a specialized tiger team to digitize Zuckerberg’s exact operational rigor. They have ingested decades of his internal emails, Q&A sessions, and product reviews to create an interactive oracle capable of delivering nuanced, highly specific strategic pushback to product managers at any hour of the day. The article noted that this virtual Zuck is designed to rapidly scale the CEO’s decision-making framework across a massive global workforce, entirely removing the human bottleneck of his actual calendar and eliminating layers of middle management that previously acted as his proxy.

My key takeaway from this bizarre science fiction reality is that Meta intends to reduce its human headcount far beyond the initial 20% cuts that have been floating around the rumor mill. I link this directly back to the thesis I laid out in my previous article, “Back to the EBITDA: Decoding Meta’s $1,116 Executive Playbook.” In that piece, I inferred that Meta was quietly planning headcount cuts well exceeding 20% in order to hit the extreme higher-end option target goals waiting for executives in the $2,000 to $3,000 stock range. Meta attempting to clone their CEO strongly suggests they must be conducting AI training and automation on almost all of their employee functions, not just the engineering department. They are building a machine that runs itself.

Looking at the market, Meta stock is currently sitting at $627, having nicely bounced back from recent lows around $525 just a couple of weeks ago. I remain incredibly bullish on Meta. Despite the massive run, the stock is still inexpensive, trading at just 18x its 2027 GAAP EPS estimate of $34. When a company uses artificial intelligence to replace the friction of human management, the operating leverage becomes astronomical.

Relevant Accrued Interest articles on :

2026.03.27: Back to the EBITDA: Decoding Meta’s $1,116 Executive Playbook

2026.03.25: Zuckerberg’s Middle-Age Metabolism: Trimming Fat to Fund Superintelligence

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Get Ready for Q1 Earnings Szn…

Earnings season is just starting to heat up, and there is a lot of noise out there. As a quick reminder, Netflix is reporting its earnings this Thursday, April 16, right after the market closes. I will be breaking down the numbers and the narrative as soon as the print drops. Make sure you subscribe so you do not miss any of my rapid-fire updates during the earnings gauntlet.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

This week, I explored how CBS is trading cultural curation for passive rent collection, why OpenAI’s $100 billion ad revenue target looks like a financial modeling mirage, and how Meta’s new proprietary AI model validates my bullish thesis. Let’s cue the record drop and get into this week’s cypher for the week ending April 10, 2026.

Before I dive in, a quick reminder: much of Accrued Interest’s investment content will soon be moving behind a paywall. Please subscribe today to ensure you don’t miss out on my ongoing TMT stock analysis, media industry commentary, and deep-dive financial breakdowns.

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CBS Abandons Late-Night Ambition for Rent Collection

CBS deciding to lease Stephen Colbert’s old 11:35 p.m. slot to Byron Allen’s Allen Media Group shows some incredibly small thinking. Instead of investing in original programming to grow their audience, CBS has opted to play the role of a passive landlord. They are handing over premium late-night real estate to an operator who is simultaneously selling off his own local broadcast stations just to manage distressed debt. To me, this signals a total lack of creative ambition.

• Starting May 22nd, Byron Allen will fill the 11:35 p.m. slot on CBS with syndicated episodes of Comics Unleashed.

• CBS is exchanging the role of cultural curator for passive rent collection through a time buy.

• Leasing to a smaller, independent entity like Allen Media Group indicates the perceived low value of this premium asset by larger tech or media companies.

• Allen Media Group is actively selling off its own local TV stations to pay down distressed debt, highlighting the broader struggles of the broadcast model.

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The Netflix Algorithm: Media’s Ultimate Kingmaker

Netflix is pulling off a brilliant move by bringing the YouTube sensation Danny Go! onto its platform non-exclusively. The streaming giant is leveraging its massive distribution power—specifically, that highly coveted home page—to expose proven, de-risked content to a huge, passive audience of parents. Furthermore, launching the curated, ad-free Playground app for kids shows exactly how Netflix is actively building an interactive moat. They are securing an ecosystem that parents simply won’t be able to afford to cancel.

• Netflix added the popular live-action children’s series Danny Go! to its lineup, though it remains available for free on YouTube.

• This non-exclusive licensing play leverages Netflix’s algorithmic distribution engine to expose the property to parents who might not actively search for it on other platforms.

• Netflix is also launching a curated, ad-free app called Netflix Playground featuring interactive games for children aged 8 and under.

• Unlike CBS, Netflix is using its robust revenue to build permanent, multi-modal ecosystems and interactive moats.

Navigating the Fog of War: Fundamental Focus Over Geopolitical Panic

The market finally let out a collective sigh of relief following the two-week US-Iran ceasefire, which lifted a massive geopolitical overhang. While the extreme tail risk of nuclear war seems to be off the table, I want to remind investors that pointless conflicts still exact a heavy toll on global energy prices. I’m using this recent drop in volatility as an opportunity to remind you to stay honest about what you don’t know. Let’s focus on what consumers actually do with their money, rather than getting distracted by fleeting relief rallies.

• The S&P 500 experienced a total year-to-date intraday drawdown of -7.72% amidst peak uncertainty on March 30, 2026.

• De-escalation hopes and the provisional truce helped the market recover, effectively cutting its YTD loss to roughly -3.3% by April 7. As of April 10th, the S&P has rebounded further and is basically FLAT YTD.

• Despite higher prices stinging, the American consumer remains wealthy and continues to spend.

• This macro pause is the ideal window to identify fundamentally mispriced assets instead of trading the news cycle.

• I will be more bullish going forward.

Deep Dive with Rigatoni Capital: Structural Shifts in Media & Ad-Tech

I had a fantastic time joining the Rigatoni Capital podcast recently to get into the weeds on the structural shifts reshaping the media and ad-tech landscapes. During the interview, I decoded the market’s current misunderstandings surrounding Meta’s CapEx panic, Netflix’s hidden catalysts, and the compounding earnings engine underlying AppLovin. It was a great opportunity to lay out my variant perceptions on these major players. You can see the interview above on YouTube.

The MCU Fallacy: Why Movie Hits Don’t Guarantee Nintendo’s Valuation

The Super Mario Galaxy Movie currently in theaters is an absolute smash hit, but I fear investors are getting a bit lazy by assuming a cool movie automatically equals a higher stock price for Nintendo. Some are also incorrectly assuming an unrealistic marketing bump from the films will magically correlate to massive game software sales. I think Nintendo is a fantastic company, but I need to be realistic about the business model. The stock currently trades at an earnings multiple that I candidly consider “fair”—neither particularly cheap nor overly expensive. In my recent article, I did some back-of-the-envelope math to show that even a top-tier cinematic success is pretty much immaterial to the company’s broader enterprise valuation.

• Based on a standard studio ultimate profit model, a highly favorable 50/50 split of a $1.36 billion global gross yields Nintendo roughly $250 million in take-home profit.

• This is a respectable, but not materially large boost to operating income, which is irregular and subject to a theatrical market that is clearly in secular decline.

• Nintendo currently trades at roughly 21x 2027 GAAP EPS and 18x 2028, which I think are fair multiples for a gaming business. This is classic GARP (growth at a reasonable price).

• Factors like the AI boom’s impact on component costs, tariff expenses, the post-COVID normalization of gaming trends, and the bootlegging of classic Nintendo games complicate earnings forecasting, in my opinion.

• More to come on Nintendo…

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Meta Protects its Margin-Driver with Muse Spark and CoreWeave

Meta’s stock saw a nice surge after the company unveiled its first natively multimodal AI model, “Muse Spark,” alongside a massive $21 billion cloud capacity deal with CoreWeave extending through 2032. By keeping Muse Spark strictly proprietary—a sharp departure from their open-source Llama heritage—Meta is sending a clear signal: AI is now a core margin-driver that must be fiercely protected. They have the sheer scale required to spread these massive infrastructure costs across billions of users, ultimately optimizing their core advertising machine.

• Meta announced a $21 billion agreement with CoreWeave to secure AI cloud capacity through December 2032.

• The highly compensated Meta Superintelligence Labs (MSL) team released the “Muse Spark” model.

• Unlike previous models, Muse Spark is kept strictly proprietary to protect it as a core margin-driver.

• Meta’s significant AI investments are actively boosting the profitability and efficiency of its core advertising business.

The Financial Mirage of OpenAI’s $100 Billion Ad Dreams

OpenAI is aggressively revising its internal forecasts higher, projecting that advertising revenue will hit over $102 billion by 2030 based on a global ARPU target of $60. Anyone with a corporate FP&A background recognizes this classic hockey-stick modeling maneuver immediately—it’s designed to justify an astronomical private valuation. To actually achieve this, OpenAI would have to match Meta’s highly-optimized, two-decade-old global monetization efficiency across lower-monetizing international regions, which is a massive stretch in my book.

• OpenAI leadership projects ad revenue will leap from roughly $11 billion in the near term to over $102 billion by 2030.

• This projection relies on generating a global average revenue per user (ARPU) of approximately $60 by 2030.

• To reach this volume, OpenAI must scale heavily into the Asia-Pacific and “Rest of World” regions, where digital ad rates are much lower.

• For comparison, Meta’s blended global ARPU in 2025 was just $57.03 across its massive, two-decade-old ecosystem.

Uber’s Asset-Light Approach to the Autonomous Future

While other tech giants are busy sinking billions into CapEx, Uber is quietly securing its future intrinsic value through strategic, asset-light partnerships. Their recent deal with MOIA (a Volkswagen Group company) to deploy autonomous “ID.Buzz” vehicles in LA by late 2026 illustrates this perfectly. Uber is positioning itself as the go-to “brain” handling the routing for the autonomous future, allowing them to pocket high-margin fees without taking on the depreciation nightmare of actually owning the physical fleet.

• Uber partnered with Volkswagen Group’s MOIA to deploy autonomous “ID.Buzz” vehicles in Los Angeles by late 2026.

• This capital-light strategy allows Uber to plug third-party robotaxis into its existing network without manufacturing or maintaining the fleet.

• Uber is also expanding its AWS deal to run its complex ride-matching algorithms on Amazon’s custom Graviton4 and Trainium3 chips to lower backend infrastructure costs.

• At $70 per share, Uber trades at an inexpensive 16x consensus 2027 GAAP EPS.

CONCLUSION

I want to send a huge THANK YOU to all the new readers and subscribers out there.

If you found any of my research helpful, please like and share so we can help grow the Accrued Interest community! I will continue to provide more tactical Daily Updates next week, alongside new stock deep dives to strip away the noise and provide the real-time signal that sophisticated readers demand.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Please subscribe to read the rest of the Accrued Interest Daily Update - for April 9, 2026.

Before I dive in, a quick reminder: Accrued Interest’s daily updates will soon be moving behind a paywall. Please subscribe today to ensure you don’t miss out on my ongoing TMT stock analysis, media industry commentary and deep-dive financial breakdowns.

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A) Meta’s latest cloud deal and “Muse Spark” model release validate my core bullish thesis.

Meta stock is popping today, up +3% to $633, following the dual announcement of their new “Muse Spark” model and a massive $21 billion cloud capacity deal with CoreWeave. If you have been reading Accrued Interest, you know my ongoing thesis: Meta is a market-leading growth stock that the market has occasionally mispriced due to short-term panic over capital expenditures.

Meta has officially announced a $21 billion agreement with CoreWeave to secure AI cloud capacity all the way through 2032. Simultaneously, they have taken the wraps off “Muse Spark,” which is the first natively multimodal AI model to emerge from their highly compensated, elite Meta Superintelligence Labs (MSL) team. This represents a significant strategic pivot for the company. In a departure from their open-source Llama heritage, Meta is keeping Muse Spark strictly proprietary. This signals a fundamental shift from treating AI as an open ecosystem play to recognizing it as a core, proprietary margin-driver that must be fiercely protected.

I look at this CoreWeave deal as a defensive play. Meta is basically locking up the compute power they need for the next decade. Sure, it means CapEx is going to stay high for a while, but here is the difference: Meta has the scale to pull it off. Meta can spread those massive costs across billions of users in its core media business without breaking a sweat—something smaller tech startups just can’t do.

Artificial intelligence is fundamentally upgrading the invisible plumbing of Meta’s massive advertising machine.

Meta’s massive capital expenditures are a calculated bet by Mark Zuckerberg. Management clearly sees these AI investments directly boosting the profitability of their core advertising machine.

By optimizing infrastructure and scaling ad efficiency, Meta is turning high CapEx into a closed-loop engine for revenue growth, proving that market concerns over their spending were misplaced.

Relevant Accrued Interest Articles to Read on :

2026.03.27: Back to the EBITDA: Decoding Meta’s $1,116 Executive Playbook

2026.03.25: Zuckerberg’s Middle-Age Metabolism: Trimming Fat to Fund Superintelligence

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B) OpenAI’s projection of $100 billion in ad revenue relies on an audaciously aggressive global ARPU target.

While Meta is proving its model today, the Information reported this morning that OpenAI is aggressively revising its long-term financial forecasts higher. Internal projections show OpenAI leadership expects advertising to eventually become their largest revenue driver. They are modeling a massive leap from roughly $11 billion in the near term to over $102 billion by 2030. To justify this figure, OpenAI is banking on generating a global ARPU (average revenue per user) of approximately $60 by 2030.

Anyone who has ever worked in a corporate FP&A (financial planning and analysis) role recognizes EXACTLY what is happening here. Pushing a massive, hockey-stick growth curve out to the end of the decade is a classic financial modeling maneuver. It is designed to justify an astronomical private valuation today, buying leadership breathing room while distracting from the slow and bumpy rollout of their early advertising products.

I did some back-of-the-envelope math, and to hit $100 billion in ad revenue, OpenAI cannot mathematically rely on skimming the cream off a premium, highly lucrative North American user base. To get the sheer volume of impressions required, OpenAI must scale heavily into the Asia-Pacific and “Rest of World” regions.

Matching Meta’s two-decade-old global monetization efficiency in under five years is a financial modeling mirage.

This is where the reality of digital advertising mechanics throws a wrench into OpenAI’s overly-promotional pitch deck. Once a platform expands globally, its geographic mix inevitably begins to mirror the broader internet population, meaning lower-monetizing international regions will drastically drag down the blended global ARPU.

(Sidebar - This is exactly like the “empty calorie” growth problem I wrote about in my February Pinterest deep dive. You can read that here: Pinterest ($PINS) Q4 Earnings: The “Value Trap” Trap Door Opens)

Let’s look at Meta’s actual, reported geographic ARPU data from 2025 to understand why OpenAI’s forecast is such a massive stretch. In the US and Canada, Meta generated roughly $78 billion in revenue in 2025. When you divide that by their active user base in the region, it translates to an annualized ARPU of over $298 per user. If OpenAI’s user base were strictly limited to Western, high-income professionals, a $60 ARPU would actually be highly conservative. However, that total market is mathematically capped. The easy monetization region is already fully saturated, meaning there simply is not $100 billion of unallocated, high-margin ad spend sitting in North America waiting for OpenAI to claim it.

Now, when you evaluate Meta GLOBALLY, the picture changes entirely. In total, Meta generated roughly $135 billion in 2025 with a blended global ARPU of just $57.03. Reaching this global benchmark requires balancing those highly lucrative, premium US users with hundreds of millions of active users in international growth markets where digital advertising rates are literally pennies on the dollar.

By targeting a $60 global ARPU for the year 2030, OpenAI is implicitly telling the market that their completely unproven search-and-chat advertising network will somehow achieve parity with Meta’s highly-optimized, two-decade-old global monetization engine in less than five years. Scaling an ad-exchange requires building a global sales infrastructure, developing robust attribution tech, and convincing sticky advertisers to move their budgets. Assuming OpenAI can reach instant maturity is a huge stretch, and long-term investors should view that $100 billion ad revenue target with intense skepticism. I will leave it up to the readers whether or not they are willing to give Sam Altman the benefit of the doubt.

Relevant Accrued Interest Articles to Read:

2026.03.12: The Pokémon Theory of Media Investing

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C) Uber is widening its autonomous moat in Los Angeles without sinking billions into CapEx.

While Meta is spending its way to dominance and OpenAI is forecasting its way there, Uber is executing a capital-light strategy to protect its intrinsic value. Uber just announced a partnership with MOIA (a Volkswagen Group company) to deploy a fleet of autonomous “ID.Buzz” vehicles on the Uber platform in Los Angeles by late 2026.

This is a big reason why I think people are still getting Uber wrong. For years, the bears argued that Waymo or Tesla would just build their own apps and make Uber obsolete. But that’s not what’s happening. Instead, Uber is setting itself up as the go-to, asset-light brain that handles the routing for the entire autonomous future.

By letting Volkswagen handle the actual hardware, Uber doesn’t have to sink billions into manufacturing or maintaining a physical fleet. They’re basically just plugging third-party robotaxis into their massive, ready-made network of riders.

As self-driving cars take off, this strategy lets them pocket high-margin routing fees without getting stuck with the “depreciation nightmare” of owning the cars themselves.

Pivoting to Amazon’s custom AWS silicon is a heavy margin-protection play for Uber’s compute-intensive future.

Alongside the VW news, it was announced that Uber is expanding its Amazon Web Services (AWS) deal to run its complex ride-matching algorithms on Amazon’s custom Graviton4 and Trainium3 chips. As Uber scales its autonomous network, the compute power required to match riders, optimize routes, and predict pricing in real-time will skyrocket. By migrating away from standard, expensive commercial GPUs and utilizing Amazon’s custom-built silicon, Uber can lower its backend infrastructure costs.

As value investors, we must be patient. These moves are not going to show up in next quarter’s EPS, and they won’t make for flashy consumer headlines. However, they fundamentally improve the long-term intrinsic value of the business. Uber is widening its moat exactly the way long-term value investors should want them to. Currently $70 per share, Uber is still an inexpensive stock, trading at 16x consensus 2027 GAAP EPS. I remain bullish despite the stock being down -13% YTD.

Relevant Accrued Interest Articles to Read on :

2025.12.21: Why Uber Will Outperform in 2026 ($UBER)

Conclusion

I want to send a huge THANK YOU to all the new readers and subscribers out there. If you found any of my research helpful - please like and share so we can help grow the Accrued Interest community!

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Please subscribe to read the rest of the Accrued Interest Daily Update - for April 8, 2026.

Note to Readers: I am aggressively expanding my publishing cadence to match the velocity of this market. My objective is to grow Accrued Interest into a premier TMT research platform for value investors, delivering a high-alpha mix of both FREE and PAID intelligence. These updates will eventually transition behind a paywall; I urge you to subscribe now to lock in uninterrupted access and secure preferential pricing before the window closes.

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A) Trading the US-Iran Ceasefire Requires Honesty About What You Do Not Know

One of the most powerful lessons I have learned trading the markets for over 20 years is that you have to be honest with yourself about what you don’t know. I am more bullish about the market today than I was yesterday because it is clear that the President does not have the intestinal fortitude to see the S&P 500 stay down. While the tail risk of nuclear war appears to be off the table, I want to remind everyone that this pointless war caused energy prices to spike all over the world and there is still a cost to be paid for all that - even if it does not show up in your portfolio.

Most of us assumed the most likely ending to this situation was TACO, (President Always Chickens Out). To give these numbers some context, the S&P 500 entered 2026 following a close of 6,845.50 on December 31, 2025. Amidst the peak uncertainty of the conflict with Iran, the real intraday low for the year occurred on March 30, 2026, when the index touched 6,316.91. This represents a total year-to-date intraday drawdown of -7.72% from the 2025 year-end close.

While the market fell more than -7% at its worst point, things began to turn around immediately afterward. The “fog of war” began to clear in early April as de-escalation hopes grew, culminating in the two-week ceasefire.

By the market close on April 7, 2026, the S&P 500 had recovered to 6,616.85, effectively cutting its YTD loss to roughly -3.3%.

So while the market is ripping higher today, realize that the market is basically back to where we were at the beginning of the year in aggregate.

To be clear, I do not think the U.S. will have a recession. The American consumer has shown that they are wealthier than they care to admit, and while higher prices sting, consumers are still spending. As a fundamental analyst, I am going to focus on what people DO with their money and not what they say. Do not get distracted by the relief rally. This is the exact window to identify fundamentally mispriced assets and evaluate true business drivers while the rest of the Street is busy trading the news cycle.

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B) My Rigatoni Capital Interview Reveals What the Market is Missing on META, Netflix & AppLovin

I am excited to announce that my new interview on the Rigatoni Capital podcast is officially live! I got into the weeds on the structural shifts happening across the media and ad-tech landscape. You can watch the full interview on YouTube here: “META, Netflix & AppLovin: What the Market Is Missing | Simeon McMillan”.

• Netflix, : Uncertainty is your friend because the market is mispricing the Warner Bros. Studio integration, and the recent Sony pay-one deal is a massive hidden catalyst.

• Meta : Decoding the CapEx panic reveals that Mark Zuckerberg has earned the market’s trust to spend, and massive, under-the-radar monetization buckets are forming in WhatsApp and AI agents.

• AppLovin : The constant barrage of short reports is just noise, and the underlying earnings engine continues to compound as SMBs ramp up retail spend in Q2.

It is always a pleasure speaking with Colin. Please check him out and follow Rigatoni Capital.

Relevant Accrued Interest Articles to Read:

2026.03.27: Back to the EBITDA: Decoding Meta’s $1,116 Executive Playbook

2026.03.25: Zuckerberg’s Middle-Age Metabolism: Trimming Fat to Fund Superintelligence

2026.03.23: The Victor of the Streaming Wars: Why Netflix is a $120 Stock

2026.02.13: AppLovin ($APP) Q4-25 Earnings Review: The “Cash Machine” vs. The Market Fear

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C) Nintendo’s ($NTDOY) Box Office Success is a Work-in-Progress (WIP) “Halo Effect” Reality Check

I went to see The Super Mario Galaxy Movie last week. It is a massive, undeniable hit. However, I am using this Daily Update to share my WIP thoughts because I am seeing a lot of lazy analysis from value investors and Substack writers who assume that cool movies automatically equal a higher stock price.

Let’s look at the actual numbers. Nintendo (Japanese Ticker: 7974) is currently trading at roughly 25x 2026 GAAP EPS and 23x 2027 estimates. While the console cycle isn’t as lumpy as it historically was, 25x is absolutely not cheap.

As I described in my article last month on The Pokémon Theory of Media Investing - when I look at a new stock, I want to get a sense of whether there is a mispricing in the earnings estimates, the earnings multiple, or both. This situation looks like if there is upside, it would need to come on the earnings side. As a rule of thumb, I typically use a hard ceiling of around 30x tops for the multiple on a “high-quality” company. For me to believe a stock is worth more than 30x, I need to have conviction that consensus earnings expectations are materially too low. In Nintendo’s case, I’m not quite there yet.

A common error in evaluating media companies that put out theatrical releases - is conflating the correlation between gross box office receipts with corporate net income. Nintendo co-financed the original 2023 Mario film with Universal Pictures and utilized Illumination for physical production. To model the actual cash impact to Nintendo, I must run the original film’s $1.36 billion global gross through a standard studio ultimate profit model.

Assuming a blended 55% domestic and 40% international rental yield, that leaves about $600 million in net theatrical rentals returning to the studios. Adding $150 million from home entertainment and $100 million from pay TV licensing brings total net studio revenues to $850 million. From there, I subtract a $100 million production budget, $150 million for global Prints & Advertising, $60 million for backend participation, and $40 million for overhead and interest.

This leaves a total net profit pool of $500 million. Assuming a highly favorable 50/50 split with Universal, Nintendo’s ultimate take-home profit from a top-3 all-time animated film is approximately $250 million. For a company generating $10 billion to $12 billion in net sales and holding over $15 billion in cash, a $250 million cash injection spread over 18 months of film accounting statements represents less than 3% of total revenue. It is highly profitable on a unit basis, but immaterial to the broader enterprise valuation.

According to TIKR, consensus expects revenue to grow about 9% YoY in both 2027 and 2028. I do not have a strong view on whether or not that is too low or too high, but I acknowledge there are other issues at play here.

Backwards compatibility complicates the software attach rate: It is difficult to model the video game cycle when the console life cycles get longer and longer. The Switch 2 is different from past cycles because it is the first Nintendo game console that is backwards compatible to the prior system. In past cycles when a new Nintendo system came out, none of the old games worked. Now you can still play Switch 1 games, creating uncharted territory for forecasting new software sales.

Post-COVID normalization limits the permanent gaming baseline: Nintendo now has more online sales than it did before, acting as a laggard to the industry in this way, but also we are now more than 5 years after COVID. The boom in gaming subsided and did not lead to a permanently higher pace of gaming.

The AI boom creates a component cost elephant in the room: How much can Nintendo pass on the cost of more expensive components for the Switch 2, most notably higher memory prices due to the AI boom?

The MCU fallacy proves movie success is rarely replicable: A true value investor must take into account all of these things about Nintendo. It is not simply a matter of cool movies resulting in a higher stock price. It is far from certain that a third Mario movie would perform as well, and how long it would take to come out. And this movie tells me really nothing about how a Zelda (announced in development), a Donkey Kong, Star Fox, or any other movie would do. The success of the Marvel/Disney MCU was truly 1 of 1. Many companies, such as DC (Warner Bros) and Hasbro with Transformers, thought they had scalable cinematic universes and it did not pan out.

Conclusion: Fundamentals Dictate Outcomes Over Fantasy Narratives

Whether it is looking past geopolitical headlines, ignoring short-seller noise on ad-tech, or doing the actual gross-to-net math on a Nintendo movie, the core philosophy remains the same: follow the growth in intrinsic value, not the headlines.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Please subscribe to read the rest of the Accrued Interest Daily Update - for April 7, 2026.

Note to Readers: Spring Break is over, and I am aggressively expanding my publishing cadence to match the velocity of this market. My objective is to grow Accrued Interest into a premier TMT research platform for value investors, delivering a high-alpha mix of both FREE and PAID intelligence. While deep-dive equity analysis remains my North Star, I am introducing these tactical daily updates to strip away the noise and provide the real-time signal that sophisticated readers demand. These updates will eventually transition behind a paywall; I urge you to subscribe now to lock in uninterrupted access and secure preferential pricing before the window closes.

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A) Byron Allen’s Late-Night Lease - The Small Thinking of a Landlord

Starting May 22nd, the day after The Late Show wraps its finale, Byron Allen will fill the 11:35 p.m. slot with back-to-back episodes of his syndicated series Comics Unleashed. He will also maintain the 12:37 a.m. hour for his comedy game show Funny You Should Ask. While CBS framed the cancellation of Stephen Colbert as a purely financial decision, the move is surrounded by controversy, with critics suggesting the cancellation of a prominent Trump critic was a strategic maneuver to curry favor with the administration during the Paramount-Skydance merger review.

CBS Trades Cultural Curation for Passive Rent Collection

Regardless of the political backdrop, CBS has completely abandoned the role of cultural curator to become a passive landlord. Instead of spending an estimated $35 million to $40 million to produce a late-night show, CBS is now being paid for the airtime through a time buy. By choosing to lease the time slot instead of investing in original programming, they are telegraphing to the market that they do not value this real estate and have zero strategy for audience growth.

This lack of vision aligns exactly with what I noted last month in my March article - Dead on Arrival: 8 Reasons the Paramount-WBD Merger Will Fail”

“David Ellison is a CEO who is 10 years too young, with a strategy that is 10 years too late to save Paramount shareholders from subpar returns,”

The Buyer’s Scale Reveals the Asset’s True Value

If CBS was determined to execute a time buy, why lease to a smaller, independent entity like Allen Media Group? If the slot still held premium value, shouldn’t a much larger media or tech company have been willing to pay a significantly higher premium for national network clearance? The fact that AMG is the buyer speaks volumes about the PSKY’s perceived value of the asset.

Handing the Keys to a Liquidating Broadcaster

The irony here is that CBS is handing the keys to its flagship late-night property to an operator who is actively liquidating his own broadcast footprint to survive. As I wrote in my June 2025 piece, “Byron Allen Selling TV Stations: Ominous Sign for Broadcast,” it is never promising when one of the biggest cheerleaders of local TV over the last 20 years decides to exit. After years of aggressive roll-up attempts, Allen was forced to hire Moelis & Company to shop his 28 local TV stations to pay down his distressed debt. Last August, he officially offloaded 10 of those stations to Gray Media for $171 million. The takeaway is clear. CBS is combining its melting ice cube of an audience with an independent operator’s melting ice cube of a business model.

Accrued Interest Take: I still expect $PSKY to underperform the S&P 500, even after “winning” $WBD.

Relevant Accrued Interest Articles to Read on and :

2026.03: Dead on Arrival: 8 Reasons the Paramount-WBD Merger Will Fail

2025.06: Byron Allen’s AMG Selling TV Stations: An Ominous Sign for Broadcast Media

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B) Netflix, Danny Go!, and the “Playground” Moat

Yesterday, the popular children’s show Danny Go! arrived on Netflix. However, this is not a traditional poaching maneuver where Netflix buys exclusivity to lock out competitors. Danny Go! will still be available free on YouTube. This non-exclusive licensing highlights Netflix’s true distribution superpower: its home page. Netflix can take a property with 4.5 million subscribers and 5 billion views and expose it to a massive, passive audience of parents who may have never actively searched for it on YouTube. It is a win-win. Netflix gets proven, de-risked content to keep its subscribers happy, and the creators get incremental reach.

The Netflix Home Page is Still Media’s Ultimate Kingmaker

I have seen another version of this playbook before, albeit for adult content. Netflix took Cobra Kai, a show that originated as a YouTube Original, and turned it into a massive global hit simply by running it through the Netflix algorithmic distribution engine. While the demographic is completely different, the mechanism is the exact same. Netflix’s homepage is the most powerful kingmaker in media.

Building an Interactive Moat Through the Playground App

Netflix is also launching a curated, ad-free Netflix Playground app for kids aged 8 and under, featuring interactive games with characters from Peppa Pig to Sesame Street. This highlights the exact opposite of CBS’s strategy. Kids’ content is currently the number two genre on Netflix, with six out of the top ten most-watched titles falling into this category. Instead of renting space to cut costs, Netflix is using its robust revenue streams to build an interactive moat.

Accrued Interest Take: I expect $NFLX to outperform the S&P 500, at $100 per share it trades at 26x 2027 GAAP EPS and 22x 2028.

Relevant Accrued Interest Articles to Read on :

2026.03: The Victor of the Streaming Wars: Why Netflix is a $120 Stock

2026.01: Netflix Q4 2025 Earnings Recap

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Conclusion: Ecosystems vs. Puddles

I am watching The Pokémon Theory of Media Investing play out in real-time. Netflix leverages its powerful cash flow to build permanent, multi-modal ecosystems. CBS, meanwhile, is extracting value from a declining medium, trading prestige for a guaranteed bottom line. You cannot shrink your way to dominance. Renting out your best assets might balance the books today, but it ensures irrelevance tomorrow.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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I. Introduction: Ignoring the Noise at $523

Today, we are going back to the fundamentals. We are going to look at the massive new executive compensation agreements Meta just filed. Nobody can predict the future, but I am going to show you how to read these legally binding SEC filings so we can understand the precise financial targets Meta’s own leadership is betting their wealth on hitting in the next couple of years.

It has been a brutal week to be a shareholder.

The stock is down 13% over the last week, down over 20% year-to-date, and down 13% over the last year, currently trading around $523. Just a few days ago, when the stock was hovering near $590, I published my deep dive, Zuckerberg’s Middle-Age Metabolism: Trimming Fat to Fund Superintelligence. Since then, the market has decided to panic.

The selloff is being driven by a cocktail of headline fears. Meta recently lost a court case regarding social media harm to kids, and now some are wondering if this is the company’s ‘Big Tobacco moment’. The Wall Street Journal just published a piece noting that Meta agrees to fund local energy infrastructure for a Louisiana data center. To some investors that screams one thing: runaway CapEx.

It is incredibly frustrating to see a sea of red in your portfolio. But when you have spent enough time in corporate finance looking at how these massive transitions are actually modeled, you learn to spot these headline mirages.

These are surface-level, emotionally driven reactions vastly overstated by the market, and ultimately temporary. Nobody can time the absolute bottom of a stock chart, which is why we must ignore the noise and focus purely on the fundamentals—specifically, what the board of directors is actually doing with their money.

A quick housekeeping note: Accrued Interest is currently 100% free. However, I will soon be moving highly technical, valuation-based deep dives like this one behind a paywall. Subscribe today to ensure you don’t miss the real alpha.

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II. The Masterclass: How to Read a Form 4 (The Susan Li Example)

Finding the Right Document

Whenever a corporate insider receives a stock grant, the SEC requires them to file a Form 4: Statement of Changes in Beneficial Ownership. Most retail investors read a blog headline that says a CFO received a bonus and scroll past. But the actual alpha is buried in the tables of that document. If the CFO is accepting a compensation package that requires a massive stock price surge to get paid, you know the internal financial projections support that reality. Let’s pull up CFO Susan Li’s recent Form 4 mega-grant and walk through it.

Filtering Out the Noise

First, you need to skip the noise and go straight to Table II.

When you open a Form 4, you will see two main boxes. Table I is for “Non-Derivative Securities,” which are usually standard Restricted Stock Units that vest simply for showing up to work. We don’t care about those. You want Table II: Derivative Securities. This is where stock options live. When a board wants to incentivize a moonshot, it happens here.

Locating the Price Target

Next, you need to find the Exercise Price in Column 2. This column tells you the board’s precise definition of success. It is the specific price the stock must reach for the executive to cash in. On Susan Li’s filing, you don’t just see one number; you see a ladder. The absolute floor target sits at $1,116.08. The ceiling tranche maxes out at $3,727.12. The board is explicitly telling the CFO that she must get the stock to at least $1,116, or she gets absolutely nothing from this tranche.

The “Do or Die” Clock

Then, you check the Expiration Date in Column 6. This is the timeline. For this grant, the expiration is listed as March 19, 2031. If Meta’s stock hasn’t hit those price targets by that date, these options expire completely worthless. It reveals the absolute maximum timeline for their AI supercycle to mature.

The Secret in the Footnotes

The tables give you the what, but the footnotes at the very bottom of the document give you the how. The footnotes reveal a hidden Price Vesting Period that runs strictly through February 14, 2028. The board didn’t just give management until 2031; they put a massive early-action accelerator in place for early 2028. They also included a secondary buffer period extending to August 15, 2030, for any options that missed the early 2028 accelerator, but the primary incentive is built around that two-year sprint. This proves management is operating on an incredibly urgent timeline to drive multiple expansion.

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III. Reverse Engineering the $1,116 Floor Target

The 50% Annualized Hurdle

For the sake of this exercise, let’s be conservative. We are going to ignore the $3,700 moonshot—we will revisit that $9 Trillion market cap scenario in a future article—and focus strictly on what it takes to hit that primary $1,116 floor target by February 2028.

What we are doing here is working backward from the board’s required share price to see what the actual income statement needs to generate to support that valuation.

Let’s look at the Compound Annual Growth Rate reality. To get from today’s panic-induced $523 share price to $1,116.08 in roughly 1.88 years, by mid-February 2028, requires a ~50% annualized return.

How does a company already valued at over $1.3 trillion actually compound at ~50% for two years? We have to reverse-engineer the math. I am going to start with what I believe is a standard 25x P/E multiple for Meta.

Working Backward from the P/E Ratio

1) Assuming a 25x multiple, hitting a $1,116 share price requires roughly $44.64 in Earnings Per Share (EPS). For context, Meta’s 2025 Diluted EPS was $23.49. Management is modeling to nearly double their per-share profits in two years.

2) Factoring in Meta’s historical habit of retiring shares via buybacks, which would reduce the share count from 2.57 billion down to roughly 2.48 billion by 2028, Meta needs to generate roughly $111 Billion to $115 Billion in Net Income. Again, for context, Meta’s 2025 Net Income was $60.5 Billion. They need to find an additional $50 Billion or more in annual profit.

To figure out what the top-line needs to look like, we have to gross that net income up by Meta’s forecasted tax burden.

3) Management has guided for a forward tax rate of about 15%. To clear $112 Billion in net income after Uncle Sam takes his cut, Meta needs to generate roughly $132 Billion in Earnings Before Taxes (EBT), which essentially mirrors our Operating Income target. That is a massive jump from the $83.2 Billion in operating income they generated in 2025.

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IV. The Revenue Bridge to $315 Billion (And Beating the Street)

The Margin Disconnect with Wall Street

4) To generate $132 Billion in operating profit at their current 42% operating margins, Meta requires a revenue base of roughly $315 Billion by early 2028 (late 2027). This is a huge leap from the $201 Billion they did in 2025 - but not that far ahead of current Street estimates. Let’s discuss further.

5) If you look at consensus estimates, the Street expects Meta to grow well this year (2026), but then decelerate down to 17.89% in 2027 and 16.36% in 2028. The Street expects roughly $296 Billion in top-line revenue in 2027.

6) To hit the $315 Billion target required for their payout, management’s internal models imply sustaining roughly 25% annualized revenue growth. They are structurally incentivized to beat Wall Street consensus by nearly $20 Billion. I think this is very reasonable!

Next - let’s model how revenue can grow to hit these targets. This is just a thought exercise to see what is possible, but when you break down the segments, you should realize this is a very achievable outcome the market is overly discounting in the P/E multiple.

Squeezing Value from the Core Ad Engine

7) First, we look at the Core Ad Engine. This baseline grows through a mix of volume (ad impressions) and pricing power. I am modeling 12% to 15% YoY impression growth, driven by AI recommendation feeds keeping users scrolling longer on Reels, which matches their recent year-over-year ad impression growth.

Combine that with 10% to 12% YoY pricing growth. Historically, higher volume meant cheaper ads. But as tools like Advantage+ and Agentic AI drive significantly higher Return on Ad Spend (ROAS), Meta should be able to charge advertisers a premium.

The $20 Billion “Other Revenue” Bridge

8) Then, we have the “Other Revenue” kicker. This part is the most speculative part of my analysis, but we need this Other Revenue bridge to fill the gap to our total $315 Billion target.

Meta’s “Family of Apps - Other Revenue” segment is currently a $3 Billion baseline. Management’s 2028 trajectory likely relies on scaling this to $15 Billion to $20 Billion. Here are the buckets where Meta can potentially generate this revenue.

The first bucket is what I am calling Meta’s communication toll-bridge, which could reach $8 Billion. This involves scaling the WhatsApp Business API by penetrating the US and European enterprise markets, transitioning companies away from legacy SMS and standard email marketing.

The second bucket is AI Agent SaaS, potentially a $6 Billion to $7 Billion business. This means charging a monthly subscription or a premium per-resolution fee to provide autonomous AI agents that handle customer service and sales directly on their platforms, replacing human reps.

Finally, the third bucket is In-Thread Commerce, adding another $2.5 Billion to $3 Billion. Meta can take a small toll on Gross Merchandise Value for transactions fully executed by their AI agents within a WhatsApp or Instagram DM thread.

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V. The Balance Sheet Evolution & The Metabolic Swap

The Data Center Depreciation Hit

9) I know the market is worried about expenses right now, especially with massive CapEx numbers hitting the headlines. But I see a clear, highly achievable path for Meta to keep their margins intact. That is the most important takeaway of this entire exercise: Meta does not need to sacrifice its profitability to fund its future.

Yes, the CapEx bill is huge. Spending $115 Billion to $135 Billion on infrastructure means depreciation expenses will spike higher in the future. If we assume they spend $120 Billion and depreciate it straight-line over an extended 4.5-year useful life, they are adding an incremental $15 Billion to $20 Billion in annual depreciation to the income statement by 2028.

How the “Metabolic Swap” Saves Margins

To protect the bottom line, management has structured the income statement to absorb this CapEx shock through what I call the “Metabolic Swap“ I alluded to in my last Meta article. While depreciation balloons by $20 Billion, Meta is offsetting it almost immediately in other areas.

First, there is Reality Labs’ surrender. By trimming the fat in Reality Labs—scrapping the lowest-performing hardware projects and shrinking that annual bonfire from $16 Billion down to a baseline of $5 Billion to $6 Billion—they add roughly $10 Billion to $11 Billion directly back to Operating Income.

Second is workforce reduction. Meta is reportedly looking at a 20% reduction in workforce. Cutting roughly 13,400 heads at a fully loaded cost of $275,000 per employee yields roughly $3.7 Billion in immediate, hard cash operating expense savings.

What we are seeing is Meta swapping human payroll and speculative VR hardware for hard AI infrastructure. The net margin impact is largely neutralized.

By doing this, operating margins can stay intact at around ~42%, allowing that massive $315 Billion in new revenue to flow straight to the bottom line without being entirely eaten by data center costs.

Embracing Middle-Age Leverage

Furthermore, as Meta transitions to a mature cash-flow machine, they are evolving their balance sheet. Historically, Meta carried zero debt. To fund these massive infrastructure projects, they are going to start carrying leverage. This is not a red flag. It is standard, efficient corporate finance. As long as top-line revenue is growing at a 25% clip, that debt is easily serviced and represents an optimal capital structure for a business of this size.

CONCLUSION: Conviction in the Chaos

The Board’s Legally Binding Bet

Stock prices will always be volatile. They will plummet because of courtroom drama, macro-economic jitters, and out-of-context headlines about power grids. We cannot control the noise. But we can read the tape. The fundamental reality is that the CFO and the Board of Directors have locked themselves into an incredibly aggressive, legally binding contract that pays out only if they deliver massive earnings expansion by 2028. The stock price will eventually, inevitably, follow the earnings.

The Share Repurchase Weapon

There is also one crucial corporate finance distinction to remember during this selloff: the more the stock price falls today, the easier it is for them to hit their targets tomorrow. If the stock continues to drop below $500, Meta’s massive cash pile becomes an exponentially more powerful weapon for share repurchases.

Buying back cheap stock juices the EPS, making those per-share targets much easier to achieve without needing a single extra dollar of revenue. I didn’t heavily rely on massive share buybacks for the math in this article, but if the stock stays down, that lever is absolutely on the table.

Looking Ahead to Q1

Q1-26 earnings are about four weeks away. We will get a fresh, hard look at the actual business very soon. Until then, the market can keep falling, but I will keep following the fundamentals. This reverse-engineering exercise gives me supreme conviction that my $850 price target from my previous article was actually highly conservative. Focus on the machine, not the headlines.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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I. Introduction: A Contrarian Bet in a Jittery Market

We are about a month away from Q1 earnings in late April, and right now, the market is offering us a massive disconnect. is currently down about 10% year-to-date, trailing the S&P 500, which is down 4%.

The Macro Mirage

I imagine a fair amount of this sell-off is being driven by broader macroeconomic anxiety. Oil prices are up and expected to stay elevated as the market braces for further conflict with Iran. With news breaking of the Pentagon deploying elite army units to the Middle East, the fear of consumer weakness and broader escalation is palpable across the tape.

The Superintelligence Sticker Shock

But that macro noise is only half the story. The real reason Mr. Market is aggressively selling off Meta is the prevailing narrative that Mark Zuckerberg is overspending on his quest for superintelligence. The headlines are dominated by massive AI infrastructure bills and the billions being thrown around in the form of lavish $100M pay packages for poached engineers. Wall Street is terrified that this spending is purely ego-driven and will ultimately not be profitable.

That fear hit a fever pitch over the last couple of weeks with reports that Meta is delaying the rollout of its newest flagship AI model, code-named “Avocado,” from March until at least May. Internal tests reportedly showed it lagging behind competitors, sparking rumors that Meta’s leadership is actually considering temporarily licensing Google’s Gemini to power its own AI products as a stopgap. For a company that guided for up to $135 billion in CapEx this year to build its own AI infrastructure, the mere suggestion that they might have to rent a competitor’s model is exactly the kind of headline that sends weak hands running for the exits.

A Midlife Clarification

However, if you look closely at the filings that hit the tape late Tuesday night (3/24), the board just sent a massive, bullish signal to the contrary through an unprecedented new executive compensation package. Meta is a company where both the organization and its leadership are approaching middle age.

But contrary to the market’s knee-jerk reaction, they are not in the middle of a crisis. Meta is consistently misunderstood by both investors and its users.

Because I want Accrued Interest to be a mix of value investing theory and tactical execution, I figured now was the perfect time to talk through why you have to be contrarian on this setup.

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II. Evolve or Die: Meta’s “Middle Age” Transition

The $80 Billion Proof of Concept

Before we can accurately price Meta’s AI future, we have to look at the immediate past. For the last five years, Wall Street has obsessed over the cash bonfire happening inside Reality Labs. Between 2021 and early 2026, Meta burned roughly $80 billion on its Metaverse and VR ambitions.

But as I have pointed out to readers before, the most important takeaway from the Reality Labs saga isn’t the wasted capital—it is the proof of concept. The fact that Meta’s core Family of Apps could swallow an $80 billion speculative tangent without breaking the company’s underlying earnings power is staggering. It proves that the core digital advertising enterprise is so dominant, and the network effects are so deeply entrenched, that the business thrives in spite of Mark Zuckerberg’s most expensive hobbies, not just because of them.

Now, Zuckerberg is pivoting the machine toward artificial intelligence, but he is doing so with a completely different operational playbook.

Not Another “Year of Efficiency”

Recently, reports have surfaced that Meta is planning a headcount reduction of up to 20%. The instinct for many investors is to read layoffs as a distress signal, but it is vital to distinguish this current round of cuts from the highly publicized “Year of Efficiency.” The 2023 “Year of Efficiency” layoffs were, in reality, just a crude correction for the massive, undisciplined over-hiring that occurred during the COVID-19 boom. It was right-sizing a bloated tech giant back to its pre-pandemic trajectory.

This time, the situation is entirely different. This is a fundamental shift in operating philosophy.

Managing the Organizational Metabolism

Meta is officially embracing its middle age. When you are a young tech startup in your twenties, your hyper-growth metabolism can hide a lot of bad habits. You can carry excess organizational fat, hire aggressively, and still see the stock climb.

But being a middle-aged adult means you can no longer rely on that youthful metabolism to just magically carry you through. You have to take active, deliberate steps to trim the fat, watch your diet, and optimize your routine to stay healthy.

Meta isn’t slashing 20% of its workforce because they are facing a crisis or missing revenue targets. They are proactively shedding weight. By aggressively deploying automation and leveraging the very AI tools they are building to increase engineering output, they are actively managing their operational metabolism. They are taking the painful but necessary steps to fund their massive AI infrastructure build-out internally, ensuring they don’t have to sacrifice their margins to fund their next chapter.

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III. Expanding the Moat: Politics & The AI Arsenal

Meta’s management of its operational metabolism is only half the equation; the other half is a ruthless expansion of its competitive moat. While the media fixates on Mark Zuckerberg’s long-term vision for superintelligence, they are entirely missing the tactical, ground-level warfare Meta is currently winning.

Political Content Push

Take the political landscape. For years, Meta has actively tried to distance itself from politics, going so far as to algorithmically deprioritize political content in the News Feed to avoid controversy. But the threat of TikTok has changed the calculus. Meta recently executed a quiet but massive about-face, rolling out financial incentives that pay top political creators up to $268,000 a month to post on their platforms.

This is a profound shift. Meta is explicitly prioritizing market share and audience capture over its previous desire for platform neutrality. As I have noted before, the audience will ultimately dictate who wins the media wars, and Meta is aggressively following that demand, weaponizing its balance sheet to poach creators from TikTok ahead of the midterms.

The Enterprise AI Stealth Play

But they aren’t just buying creators; they are building an entirely new infrastructure to lock them—and the advertisers who fund them—into the ecosystem.

This brings us to the recent acquisitions of Manus and Moltbook.

If you only read the mainstream tech press, you would think Meta’s AI ambitions are strictly about building consumer-facing chatbots to rival ChatGPT. That completely misses the enterprise play. Moltbook brings a dedicated social network for AI agents and top-tier talent into Meta’s Superintelligence Labs.

More critically for the stock’s valuation, the integration of the Manus tool is a game-changer for the actual revenue engine.

Manus isn’t a toy; it is an agentic AI built specifically for media planners and buyers to automate campaign analysis, audience research, and competitor tracking using Meta’s massive Ad Library. By integrating autonomous AI agents directly into the workflow of creators and media buyers, Meta is creating an incredibly sticky, high-utility toolset. They are transforming from a platform where you simply buy ads into the autonomous operating system you use to run your entire digital marketing business. That kind of utility typically commands a massive premium. It makes leaving the Meta ecosystem virtually impossible, which makes it all the more ridiculous that Meta is currently trading at a steep discount to the broader market multiple.

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IV. The Fundamentals Engine is Still Roaring

The ATT Myth and the Revenue Floor

To fully appreciate the absurdity of that discount, you have to look at the resilience of the core business. There is a widely misunderstood narrative on Wall Street regarding Meta’s sensitivity to the broader economy. The truth is, Meta has never actually faced a revenue decline driven by macroeconomic events.

The only period of sustained pressure on their top line occurred when Apple introduced its App Tracking Transparency (ATT) framework. That wasn’t a macro issue; it was a structural signal loss. Meta was forced to rebuild its advertising signal from the ground up for advertisers without relying on Apple’s ecosystem. As their recent performance proves, they succeeded spectacularly.

The Metric That Matters

As a reminder from my Q4 2025 earnings recap, the single most important metric for evaluating the health of this machine is ad impression growth. In Q4, ad impressions grew an incredible +18% year-over-year. That wasn’t an anomaly; it was the continuation of a trend where ad impression growth has accelerated sequentially over the last three quarters. The AI is working. It is keeping users engaged longer and creating more inventory.

Furthermore, the very nature of Meta’s auction-based model provides a massive structural hedge against the consumer weakness the market is currently fearing. If rising oil prices or geopolitical anxieties cause one major advertiser to pull back their spend, the auction doesn’t break—the next bidder in line simply steps up to clear the inventory.

The financial guidance tells the same story. For Q1 2026, management guided for revenue between $53.5 billion and $56.5 billion. If Meta continues to grow its top line at around +20% year-over-year, they can easily fund their AI ambitions out of free cash flow. All they have to do is execute, and Wall Street will inevitably forgive the CapEx.

(A quick note to all of my free subscribers—which, as of right now, is 100% of you! In the future, this is exactly the type of section where I might apply a selective paywall as we get into the harder valuation mechanics, EPS breakdowns, and technical modeling. But in the meantime, please enjoy the free analysis below, and if you haven’t already, make sure to hit that subscribe button!)

Now, let’s get into the numbers and see why the multiple is completely disconnected from reality.

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V. Valuation: A Growth Giant Priced Like a Value Stock

Multiple Contraction Meets the AI Supercycle

The most critical thing to understand about Meta’s current stock price is that the recent sell-off has not been driven by a deterioration in fundamental earnings power. The earnings are still there. The sell-off is entirely a function of multiple contraction. Mr. Market has decided to punish the stock because of the headline sticker shock of the CapEx guidance.

But when you zoom out, this panic has created an absolute gift for investors willing to look past the next quarter. It is genuinely insane for a company as dominant as Meta—a company that is actively shaping up to be one of the definitive winners of the AI arms race—to trade at a discount to the broader market multiple.

The Path to $850 per Share

Let’s look at the actual math, referencing the latest estimates from the TIKR Terminal:

• Current Price: ~$595

• 2026 Valuation: The stock is currently trading at just 19.8x consensus 2026 GAAP EPS of roughly $30 per share.

• 2027 Valuation: Looking one year further out, it is trading at a staggering 17.5x consensus 2027 GAAP EPS of roughly $34 per share.

I see a clear, structurally sound path to $850 per share. If the market wakes up and simply applies a fair, market-level 25x multiple to those 2027 earnings of $34 per share, we get to $850. That represents an upside of over 42% from today’s levels.

The $9 Trillion Declaration of Intent

If you need further proof of management’s conviction in this trajectory, look at the SEC filings that hit the tape this week detailing a new executive incentive program. The program is designed to vest in tranches, culminating in a full payout only if Meta reaches a $9 trillion market capitalization by 2031. For context, that requires the stock to surge over 500% to $3,727.12 per share. The floor is equally telling: the very first tranche doesn’t even begin to pay out until the stock hits $1,116.08—an 88% premium to today’s trading levels, representing a ~$2.82 trillion market cap.

The options cover the core operational brain trust: CFO Susan Li, CPO Chris Cox, COO Javier Olivan, CTO Andrew Bosworth, CLO C.J. Mahoney, and Vice Chairman Dina Powell McCormick. Alongside these options, Meta is boosting RSU grants for these execs by $170 million. This highlights the sheer cost of the ongoing AI talent war; in 2025, cash costs tied to employee stock awards consumed 96% of Meta’s free cash flow ($42 billion), necessitating massive buybacks just to offset the dilution.

The Tesla Playbook on a Compressed Timeline

This options package acts as a massive neon sign confirming management’s internal modeling for the AI supercycle. First, it forms a direct bridge past my $850 price target. This new incentive plan essentially confirms that management views the $800-$900 range not as a terminal plateau, but as a stepping stone. By setting the absolute minimum payout threshold at $1,116.08, the board is signaling that the fundamental engine is expected to push earnings power significantly higher as the 2026/2027 CapEx investments come online.

Second, it is the Tesla “moonshot” playbook, but on a compressed timeline. Meta’s board is demanding growth from $1.5 trillion to $9 trillion in just five years.

This aggressive 2031 deadline tells us that management believes the transition from a traditional social media ad platform to an autonomous, agentic AI ecosystem will trigger a violent, structural multiple expansion much faster than the market currently anticipates.

Finally, it serves as a brilliant hedge against the “CapEx shock” narrative. This compensation structure is the board’s way of locking in the executive team and aligning their wealth entirely with shareholder value. If the CapEx buildout turns out to be a cash incinerator, these options expire worthless. The executives are now financially handcuffed to the success of the infrastructure moat they are currently spending billions to build.

This isn’t a standard retention package; it is a declaration of intent.

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Conclusion: The Tactical Play

You have to be contrarian here. The market is incorrectly handicapping this AI winner, pricing it like a value-trap utility rather than a compounding growth engine. I strongly recommend considering adding to common stock at these levels. Alternatively, for those looking to maximize leverage on this mispricing, consider looking at LEAPS (long-term options) expiring in late 2027.

Starting in late 2026, as the midterms approach and political ad spending shifts into overdrive, many investors are going to wake up and realize just how massive a share of those political ad dollars are flowing directly into Meta. Between that influx of cash and the fully realized efficiencies of their AI infrastructure, everyone is going to remember just how necessary this machine is, and the multiple will violently re-rate.

Don’t bet against the machine when the engines are just getting warmed up.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.

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Introduction

A few days ago, I published a piece breaking down exactly why the Paramount-WBD merger is a slow-moving trainwreck. The reaction to that post across the internet was massive, but the core takeaway of that thesis was incredibly simple: when you bolt together two melting ice cubes with a $79 billion debt anchor, you don’t get a dominant digital platform—you get a liquidity crisis. ,

The logical follow-up question: what does this mean for ?

Here at Accrued Interest, we ignore the noisy media narratives. We focus purely on market structure. And the fundamental structure of the global entertainment market proves that the “streaming wars” are officially over. It is now absolutely a two-horse race between Netflix and YouTube. Everyone else is just fighting for third place, and they are burning billions of dollars of shareholder equity to do it.

The contrast in forward-looking runways couldn’t be starker. While legacy media spends the next three years paralyzed by integration issues, boardroom infighting, and regulatory hurdles, Netflix operates with absolute, unencumbered clarity. We are witnessing the execution of a pure tech monopoly leaving its legacy peers in the dust.

The Competitor’s Curse and the Organizational Paralysis

When you look at the landscape today, the competitor’s curse is very real. As Netflix Co-CEO Ted Sarandos recently pointed out regarding the fallout of the WBD bidding war, whoever won that debt-laden prize will be forced into making operational cuts “in the excess of $16 billion.”

Think about what that actually means inside a corporate structure.

For the next 36 months, the newly merged entity will be stuck in endless committee meetings figuring out which middle-management layers to fire, which tech stacks to sunset, and how to satisfy their bondholders. This creates a state of perpetual organizational paralysis.

When future premium content comes up for licensing—whether that is a hit television show from a third-party studio or a highly coveted piece of intellectual property—Netflix can move swiftly and aggressively. They have the balance sheet and the operational clarity to write the check and move on, while their biggest competitors are still trying to figure out who has the authority to approve the budget.

The “Harry Potter” Infrastructure Gap

But the biggest structural advantage Netflix possesses isn’t just a clean balance sheet; it’s their underlying technology footprint.

Wall Street often misjudges media companies on the volume of their content library. But in the digital age, a content library is useless if you do not have the delivery infrastructure to monetize it seamlessly across borders.

Even if David Ellison had Harry Potter’s magic wand and could instantly integrate Paramount and WBD’s tech stacks today with zero friction, they still do not have the infrastructure to stream globally at the scale of Netflix.

Let’s see the actual footprint. HBO Max is currently available in roughly 100 countries—but crucially, it is still locked out of massive, high-ARPU English-speaking markets like the UK and Australia due to legacy licensing deals. Paramount+ is even worse; it operates as a standalone app in fewer than 35 countries. To get into Europe, they were so sub-scale they had to form a joint venture just to distribute their content.

Netflix, on the other hand, operates natively in over 190 countries. They own the entire tech stack, the billing architecture in local currencies, and the content delivery networks (CDNs) almost everywhere on earth.

We just saw the ultimate proof of this impeccable execution. Last weekend, Netflix exclusively livestreamed the BTS Comeback concert. While legacy streamers regularly struggle with app crashes, latency issues, and buffering during live events, Netflix seamlessly broadcasted the world’s biggest pop group live from Seoul to 190 countries, instantly hitting #1 in 77 of them. Legacy media is playing a localized game with borrowed money. Netflix is playing a global game with massive operating leverage.

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The Macro Safe Haven: Hedging Geopolitical Risk

If you noticed that I took a two-week break from publishing recently, it was because the sheer level of geopolitical uncertainty had effectively frozen the broader markets. We all understand that traditional hardware, semiconductor, and manufacturing stocks are heavily exposed to supply chain shocks and tariffs. But what is dangerously underappreciated by the Street is that legacy media has its own set of geopolitical landmines.

Take James Gunn’s recent Superman as a warning sign.

While the domestic box office for the film was a strong $356 million, it severely underperformed internationally, dragging its global haul to just $617 million. The fanboys might not care, but WBD shareholders can reasonably point the finger at a very real problem: geopolitics. Anti-US sentiment definitely hurt the commercial reception of such a patriotic-coded American character. Gunn himself explicitly admitted this, noting to Rolling Stone, “we have a certain amount of anti-American sentiment around the world right now. It isn’t really helping us.”

Even Ted Sarandos, while recently testifying under oath before the Senate Judiciary Committee regarding theatrical exclusivity windows, openly cited the film’s underperformance as evidence of shifting global consumer behavior.

The structural flaw here is that legacy media relies almost entirely on exporting American cultural icons to generate a return on invested capital. That makes them highly vulnerable to geopolitical whims. We’ve seen the precedent over the last decade, where unilateral government decisions in regions like China can instantly block certain Western films, wiping out hundreds of millions in regional monetization overnight. When your balance sheet requires a traditional American superhero to overperform globally just to service your debt, you are taking on massive sovereign risk.

This is why Netflix is the ultimate defensive play in the media space. They don’t just rely on exporting American blockbusters; they invest heavily in sourcing local content in every respective market they operate in. Regardless of shifting political winds or sudden anti-US backlash, Netflix’s content pipeline is already localized by design.

We already saw the proof of concept for this decentralized production pipeline during the COVID-19 shutdowns. When US domestic production ground to an absolute halt, legacy studios starved for new releases. Netflix effortlessly pivoted, utilizing its massive international backlog to push high-quality foreign content to US and global audiences who had never seen it before. Combine this decentralized, globalized content engine with a “zero supply chain” digital subscription model—where you are shipping pixels, not physical goods—and you have a company uniquely insulated from physical borders and political blowback.

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Cost Control as Alpha: The Live Sports Hedge

If you want to understand the trap that legacy media is currently stuck in, look no further than live sports rights.

Right now, the NFL is reportedly pressuring Paramount’s CBS to eliminate their 2029-30 opt-out clause. In exchange for extending the deal, the league is demanding a 50% fee increase. That means CBS is looking at an additional $1 billion per year—pushing their annual payment to over $3 billion—just to keep the exact same Sunday afternoon package they already have. Legacy networks are effectively being held hostage. They have to pay margin-crushing premiums just to maintain their existing viewership baselines.

So, how do you hedge against the risk of rising NFL fees? The best way to hedge the risk of rising NFL fees is to not have a full slate of NFL regular season games to begin with!

This is where Netflix’s surgical approach to live sports becomes a massive driver of alpha. They have wisely added sports without taking on full-season commitments. By securing only high-impact, select holiday events—like their Christmas Day NFL games—they pick and choose the exact spectacles that maximize viewership ROI. They get the cultural event status and the advertising surge without inheriting the massive fixed costs of a 17-week broadcasting schedule.

We just saw another brilliant execution of this strategy with the 2026 World Baseball Classic. Netflix secured the exclusive rights to stream all 47 WBC games in Japan. Because sports broadcasting rights are heavily regionalized, Netflix was able to bypass the local Japanese terrestrial networks entirely and secure exclusivity in one of the most hyper-valuable baseball markets on earth. Furthermore, by targeting just the Japanese region, they didn’t have to engage in a ruinous, ego-driven bidding war against Fox for the U.S. broadcast rights.

While legacy media companies are bleeding cash to rent sports rights in saturated markets, Netflix is deploying capital surgically to drive localized dominance.

(A quick note to all of my free subscribers—which, as of right now, is 100% of you! In the future, this is exactly the type of section where I might apply a selective paywall as we get into the harder valuation mechanics, EPS breakdowns, and technical modeling. But in the meantime, please enjoy the free analysis below, and if you haven’t already, make sure to hit that subscribe button!)

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The Valuation Engine: The “Pokémon Theory” of Margin Expansion

If you want to understand how to generate outsized equity returns, you have to subscribe to the “Pokémon Theory” of investing: a company must evolve. Margin expansion—the holy grail of earnings growth—only happens when a company can make a sub-segment’s revenue grow significantly faster than its underlying fixed costs.

For Netflix, that evolutionary engine is advertising.

Management’s 2026 guidance projects top-line revenue growth in the low double-digits to mid-teens (roughly 12-14%).

But the real story is that their operating margin is forecast to expand to 31.5%. Because Netflix already spent the last decade building and paying for its massive subscription infrastructure, the fast-growing ad business—expected to hit roughly $3 billion—is incredibly high margin. That ad money drops almost straight to the bottom line.

Looking at the latest Street consensus estimates via TIKR, the analyst modeling is highly reasonable and, if anything, slightly pessimistic. The Street is forecasting median Sales of roughly $51.2 billion for 2026, representing YoY growth of 13.2%. They then project a steady, gentle deceleration down to 11.6% growth in 2027 and 10% in 2028.

The 2026 EBIT forecast sits right around 31.6%, matching management’s guidance. I believe there is upside here. If that high-margin ad revenue scales faster than expected, that margin expansion will pull forward much sooner than the Street anticipates.

This margin expansion is compounded by their ruthless capital discipline. When the Warner Bros. bidding war reached peak irrationality, Netflix simply walked away—taking a massive $2.8 billion breakup fee just for showing up. As Ted Sarandos pointed out, “We’re builders, not buyers.” Instead of burning cash on ego-driven M&A, that $2.8 billion goes straight to accelerating their share buyback program, artificially shrinking the float and mathematically boosting EPS.

Conclusion: The Time Arbitrage Play

The stock is currently trading around $94.00, which prices it at roughly 30x the 2026 GAAP EPS consensus of $3.14. I believe 30x is a full, but entirely fair, multiple for a dominant, defensive, digital-first global entertainment platform. I would NOT base my price target on a multiple higher than 30x unless I had immense conviction that top-line revenue was going to violently obliterate Street estimates.

Because the current multiple is fundamentally correct, this is a classic Time Arbitrage play.

“Time arbitrage refers to an opportunity created when a stock misses its mark and is sold based on a short-term outlook with little change in the long-term prospects of the company.”

I have high conviction that Netflix will easily meet or beat their future earnings estimates, so I am willing to take on the risk of the stock today to buy it at a discount to its 2027 and 2028 earnings power.

By applying that full 30x multiple to roughly $4.00 in earnings—which sits just slightly ahead of the Street’s $3.88 median estimate for 2027—we arrive at a $120 Price Target. That represents an absolute return of over 27% from today’s $94.00 price.

Legacy media is playing a desperate game of defense just to survive another quarter. Netflix is playing offense while returning capital to shareholders. It is time to allocate accordingly.

What do you think is the biggest threat to this $120 price target? Let me know in the comments below!

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.