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0. Introduction

On Monday night in Seattle, Belgium put four goals past the United States and ended the USMNT’s World Cup. The night before, in Mexico City, England ended Mexico’s tournament 3–2. Let me be precise about the mood that followed, because it matters for what comes next: nobody was predicting ruin for anybody. The mood was disappointment mixed with an unusual amount of confusion.

The disappointment was about the manner of the exit. An encouraging group stage had fans dreaming of a first quarterfinal since 2002, and then the U.S. went out flat, at home, in front of everyone. The reaction was rough even from friendly quarters — The Hollywood Reporter’s roundup of the fallout ran under Dave Portnoy’s verdict that U.S. soccer is “not ready for primetime,” and captured the genuinely surreal spectacle of Fox’s own announcers pleading with viewers, live on air, to PLEASE keep watching the tournament anyway. Within a day I saw multiple articles circling the same question: with the host countries eliminated before the quarterfinals, can this WC keep its momentum? What happens to the record audiences now?

To be clear - these were fair questions. So I made a video answering them, and something unusual happened: it went mini-viral, with over 1,000 views in under two hours. That’s my small version of “breaking the internet” on my little YouTube channel.

I think it traveled because the answer genuinely surprises people: Fox and Telemundo do not mind that the U.S. and Mexico are out. The business was never riding on them. And the part that surprises people even more: those record-shattering ratings didn’t necessarily make the networks more money either (with one exception we’ll get to, and it’s a good one).

The reaction to the video convinced me this deserved a full deep dive. Because underneath the World Cup story is the thing I actually want to write about, which is why I trust markets more than commentary.

1. Where I’m coming from

For a stretch of my career I sat on the Sports Ad Sales Pricing Team at Univision, pricing Spanish-language soccer inventory. I was on that team for less than a year, but it was the most instructive year possible: I joined in early 2020, right as the pandemic — whose human toll needs no recounting from me — shut down every sporting event on Earth.

From a pricing seat, we had sold a book of business against a schedule of games, and suddenly there was no schedule! When sports came back, it was a Herculean effort: cancelled matches, shifted dates, shortened seasons, ad dollars shuttled between properties to make advertisers whole, and ratings estimates rebuilt from scratch because every assumption had changed. I worked with the research team, learning why their estimates came in where they did. The answer, I learned quickly, was deliberate, structural conservatism — because the one thing a network does not want to do is owe an advertiser a make-good.

I’m telling you this because here is what I learned: what people pay for is the truest record of what they value. It’s the reason I love the stock market, and business generally. Words are cheap, prices are actions, and actions don’t lie. A rate card, properly read, is a lie detector — for an audience, for a sport, and as we’ll see, for a culture.

2. Why the broadcasters shrugged

Let’s start with the fact that the money was booked before the tournament ever began. Telemundo announced in early Dec 2025 — more than six months before kickoff — that it was 90% sold out of its entire World Cup inventory, across roughly sixty brand partners, with the largest advertising deals in Spanish-language television history and total spend DOUBLE the 2022 cycle. In fact, inventory was effectively sold out across both networks. Fox’s most premium sponsorship packages ran anywhere from $15 million to $50 million, per media buyers who spoke to Adweek, and access to marquee matches was bundled: you don’t get near the final without committing to a tournament-wide package first.

This is how all elite sports properties work. The World Cup wasn’t sold match-by-match, the way casual fans imagine; but packaged and pre-sold at the upfronts, with FIFA’s official partners getting first refusal on the prime placements.

Now, the pricing itself…and here’s where my old job becomes relevant. The rate card for each match already incorporates the participating teams’ history. Thirty-second spots ran from roughly $300,000 in the group stage to an estimated $1–2 million for the late rounds, per Front Office Sports. And critically, Fox sold USMNT telecasts separately, at a premium — close to $1 million for some spots in Team USA’s first two group matches. Which means team-specific value was isolated and captured up front, and late-round pricing was tied to the round, not to which teams survived.

Here’s the thing about pricing on history: both the United States and Mexico have long histories of exiting in the Round of 16. It is, statistically, their base case. Belgium eliminating the USMNT in the Round of 16 isn’t even novel — Belgium did precisely that in 2014, in the iconic Tim Howard game. So when both host teams went out this week, the market didn’t reprice. The eliminations were the expected outcome embedded in the rate card. Nobody was underwriting a semifinal run.

Then there’s the asymmetry that most coverage misses entirely, and which Digiday flagged in its media buying briefing this month: networks guarantee advertisers a ratings level, and the consequences only run one direction. Fall short, and you owe make-goods — free compensatory inventory, real economic cost. Overdeliver, and you get...well, nothing. You cannot go back to a brand and bill them extra because the audience doubled. Overperformance is a freebie to the buyer. This is exactly why TV research departments build conservatism into every estimate. The guarantee is designed to be beaten.

This WC, Fox averaged 5.05 million viewers per group-stage telecast, up 92% from 2022 and the best English-language group stage ever. Telemundo averaged 4.6 million per match, up 122% — a figure its own sports chief admitted exceeded internal expectations. Combined, 9.65 million viewers per group-stage match, more than double 2022. USA–Bosnia in the Round of 32 drew roughly 36 million combined across languages, the most-watched English-language soccer telecast in American history. Fox’s Mike Mulvihill said they were seeing numbers “we don’t see for anything but the NFL.” (FYI…One honesty footnote before you extrapolate: this is the first WC measured under Nielsen’s expanded out-of-home sample and its new Big Data methodology, both of which inflate raw comparisons to prior years, and a home-time-zone tournament will always beat 2022 Qatar’s morning windows. The growth is real but the exact multiples deserve an asterisk.)

What the overdelivery did accomplish was two things: it vaporized any make-good liability, and it turned the held-back reserve — the inventory networks keep in their pocket precisely in case ratings fall short — into a profit center. As the LA Times noted, Fox can now take that reserve back into the marketplace and sell late-round spots for more than anyone paid before the tournament. The insurance policy effectively became another scatter market.

So in the business of soccer, the scoreboard and the rate card are different instruments, and they were never measuring the same thing.

3. The one real windfall — and the network that refused it

I said there was an exception, and it’s the most interesting business story of the tournament.

For the first time in World Cup history, FIFA introduced mandatory hydration breaks — roughly three minutes per half, framed as player welfare in the summer heat — and allowed broadcasters to sell advertising inside them. Up to four 30-second spots per break, two breaks per match. Run the math the way Awful Announcing did: 8 in-game units per match, times 104 matches, equals 832 sellable commercial spots that did not exist in any prior World Cup. Estimates of what this is worth to Fox start around $250 million and run as high as $500–600 million at the ceiling.

For context on why that number is so consequential: Fox paid $485 million for the entire tournament’s English-language rights — a VERY below-market figure, roughly a third of what analysts think the rights are worth, thanks to a deal negotiated back in 2014 under circumstances I covered in my May 27 Update (“Accrued Int: Fox’s Grand Theft FIFA” ). I won’t relitigate that here. The point for today is narrower: the hydration breaks alone may cover most or all of Fox’s rights fee, on inventory that was never contemplated when the original packages were sold. Fox has run full-screen commercials in every single break — with enough enthusiasm that it came back late from one in the opening match and English-language viewers missed a live restart, in violation of FIFA’s own buffer rules. (FIFA declined to punish them.)

And Telemundo? Telemundo left the breaks unsold. All of them. During hydration breaks, Telemundo stays with the live feed — the huddles, the coach conversations, replays and analysis, with sponsor thank-yous woven in non-intrusively. Trevor Noah publicly praised them for it.

I was not remotely surprised. Telemundo’s audience are soccer natives — people who grew up inside the rhythm of an uninterrupted 45-minute half, for whom a full-screen commercial during live play doesn’t read as a break, it reads as a violation. Fox’s audience skews toward viewers raised on the quarter-based cadence of American sports, where a mid-half commercial pod feels natural. The same inventory carries different costs to different audiences. Telemundo declining hundreds of millions of dollars is not sentimentality. It’s a pricing decision — a judgment that the long-term value of an audience relationship exceeds the short-term value of 832 spots. Which raises the obvious question: why is that relationship worth so much to them?

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4. The shrinking network and its crown jewel

Because — and this cuts against conventional wisdom — Spanish-language television has been in secular decline for decades, and everyone inside the business knows it.

The conventional wisdom says the massive, well-documented growth of the U.S. Hispanic population should be a rising tide for Spanish-language media. What I learned quickly working in the industry is that the tide runs the other way. Viewer assimilation is fast and undeniable: after one generation, the typical SL household’s media tastes are essentially indistinguishable from any other American household’s. Younger viewers were not showing up for telenovelas. And the audience got hit with a triple whammy on distribution — not just cord-cutting and cord-shaving, but a higher propensity toward cord-nevers: households that never bought a cable subscription in the first place. The paradox is real and worth naming plainly: Hispanic culture in America is more prevalent and vibrant than it has ever been, while the Spanish-language entertainment business has been shrinking the entire time.

This makes sports not just the best inventory on the SL networks, but basically the load-bearing wall of their entire advertising book. I don’t need to tell you that live sports is the last form of content that still commands massive LIVE audiences. For Spanish-language networks, that dynamic was doubly true, because the rest of the schedule was bleeding out underneath it.

Now, on a Spanish-language pricing and planning team - you don’t see one league; you see a portfolio. For Liga MX (the primary domestic league in Mexico), every club sells its U.S. rights individually — so you’re not pricing “Mexican soccer,” you’re pricing Club América’s fanbase against Puebla’s, week by week — with a split-season format that produces 2 championships and 2 playoff runs every calendar year. The Mexican national team was the anchor tenant, the single biggest draw on American soccer television, with the USMNT a clear second. Gold Cup summers. The CONCACAF club competitions. The Leagues Cup. Sold-out El Tri friendlies in NFL stadiums. Pricing across all of it teaches you relative value in a way no Big Four sport can. No U.S. network airs a foreign basketball or baseball league, so pricing the NBA is pricing a monopoly. Pricing SL soccer is comparative valuation, like running a portfolio.

Now there are two structural facts about that portfolio I want to dive deeper into. First, Liga MX is the only imported league whose schedule lives in American prime time — Friday night matches, a three-match block every Saturday night, and Sunday games — because Mexico shares our time zones. The English Premier League airs on Saturday mornings Eastern, but Liga MX goes head-to-head with American sports in the evening. Second, the revealed-preference verdict: for most of the last twenty years, the most-watched soccer league on American television has been Mexican. In 2019, the Liga MX final between América and Monterrey drew 3.3 million U.S. viewers — more than that year’s Champions League final. As recently as last summer, Spanish-language networks captured over 60% of all U.S. soccer viewership, in any language.

Read this summer’s World Cup numbers through that lens and things look different. Telemundo captured 48% of the total U.S. World Cup audience while U.S. Hispanics are 20% of the population — and per Nielsen, a fifth of Telemundo’s World Cup viewers speak English as their primary language. Soccer is the one category where assimilation runs in reverse. So these 2026 records are not a rising tide for Spanish-language TV. They are the concentration of a shrinking medium’s remaining value into its one irreplaceable property. Now Telemundo’s hydration-break restraint reads correctly: when one property is holding up the house, you do not cheapen it to make a quick buck.

Let me give one more piece of history because it points at the future. When I joined Univision, the historicals told a painful story: they used to have the World Cup, but Telemundo outbid them and stole it away. Candidly, given Univision’s balance sheet at the time, I think passing was the correct call. But let’s be clear-eyed about how Telemundo pulled off this heist: it is NBC’s sister network, and it bid with Comcast money. Capital structure decides who gets to broadcast a culture. I’m watching the Comcast/NBCUniversal spinoff closely (Accrued Int: Comcast Says the Quiet Part Out Loud), and the open question writes itself: how competitively can Telemundo bid on future World Cups when NBCUniversal no longer has broadband cash flow standing behind it? That’s a topic for another day. (And a good reason for you to subscribe so you don’t miss the answer!)

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5. What the home league sold

If you want to see how the same revealed-preference lesson runs in the opposite direction, look at America’s own league. MLS has NEVER been a ratings force or a moneymaker on U.S. television, despite the sport’s popularity — and in 2022, the league said the quiet part in contract form. MLS signed a ten-year, $2.5 billion deal with Apple: a guaranteed $250 million per year, nearly triple the roughly $90 million a year its previous ESPN/Fox/Univision deals produced combined, in exchange for disappearing into an exclusive walled garden behind a Season Pass paywall. It was controversial but I understood it completely. It was a tacit admission that MLS saw no realistic path to broadening its U.S. television audience — so they secured the bag, as the kids used to say.

Then the market rendered its verdict, in three acts. Season Pass subscriptions struggled to grow meaningfully even after Lionel Messi arrived. The 2024 MLS Cup Final drew all-time-low viewership despite streaming for free. And through it all, the most damning data point was the silence: when MLS vanished behind the paywall, nobody missed them. No outcry, no campaigns, no think pieces demanding their return. (Absence is a price signal too.)

By November 2025, both sides conceded — Apple folded Season Pass into its standard subscription, the deal was restructured to end three and a half years early, and MLS viewership promptly jumped 62% once the wall came down. Revealed preference, twice over: once when the audience didn’t follow, and again when the parties tore up their own contract.

Apple’s side of the trade was a revealed preference of its own. Apple TV, for all its brand ubiquity, has always been a niche, prestige service — more critical acclaim than viewers — and its pursuit of MLS was an admission that it viewed the league’s audience as upper-middle-class, educated, and small. (Formula 1 made a similar reach-for-cash trade to Apple starting this season — roughly $140 million a year — though from a position of strength rather than resignation, and with one delicious detail: Apple says it won’t release race-by-race viewership.)

To recap…the most-watched soccer league on American television is foreign, in Spanish, and free over-the-air. The domestic league sold its reach to the most exclusive walled garden in all of media. Same country, but the gap in prices told you everything.

6. A brief word in defense of American soccer

Since we’re reading markets honestly, one more — and I’ll keep it short, because it’s a coda, not a thesis. Within hours of the Belgium loss, the familiar diagnosis was all over the timeline (it even made THR’s reaction roundup): pay-to-play youth soccer is destroying American development, and that’s why we lose. I don’t fully buy that explanation.

American youth soccer is a pricing story too, just an inverted one: broadcast prices the demand to watch; but pay-to-play prices the ability to play. Premium club soccer runs $3,000 to $10,000-plus a year, and the mechanism is textbook scarcity — American parents demand paid coaches with at least college playing experience, only 7–10% of youth players ever play at that level, and inelastic demand against thin supply forces registration fees up. (Before soccer exceptionalists pile on: travel baseball and AAU basketball run the same model at similar prices. This is just American youth sports culture, not a soccer defect. And the European comparison is mostly a fallacy — Barcelona’s academy serves the scouted top 1–2%, it doesn’t subsidize the masses; volunteers do.)

So I’ll push back on the popular narrative: it is not as simple as “talented poor American kids are priced out, and that’s why we lose.” The market comparison nobody makes is sitting right across the border. Mexico is a soccer nation where NOBODY is being priced out of the game — and for nearly two decades, the Mexican and American men’s national teams have been rated within shouting distance of each other. They ended 2025 ranked 14th and 15th in the world. They both just went out in the Round of 16, as usual. It’s an imperfect comparison, but if the pay-to-play tale explained everything, El Tri should be lapping us, and they are not. One thing pricing this sport taught me is to be a little less hard on U.S. Soccer than the general public is. The revealed outcomes don’t support the outrage.

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Conclusion: 2030, and what the rate card says next

The tournament isn’t over, but the forward story is already in motion. The 2030 World Cup sits in Morocco, Spain, and Portugal, five to six time zones ahead of New York, which means afternoon U.S. windows and a structural ratings headwind — and the rights fight will be ferocious anyway, because 2026 just proved what this property does. NBCUniversal has already signaled interest in adding English-language rights to its Spanish-language package. Whether Telemundo can bid like a Comcast subsidiary after it spins is a topic for another day.

Here’s what I’ll leave you with. This week, a disappointed country looked at two losses and wondered, sincerely, what it meant for the rest of the tournament — whether the momentum, the audiences, the whole booming business of it could hold up without the home teams. The market answered, quietly, the way it always does — in guarantees written months ago, in reserves repricing upward, in 832 commercial units that didn’t exist a tournament ago, and in one network’s decision that its audience was worth more than the windfall. None of that was visible on the scoreboard. All of it was visible on the rate card.

The rate card knew. It usually does.

Relevant tickers: , , , , , ,

— 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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0. Accrued Interest Is the Best Short-Selling Value Investing Newsletter on Substack

Scan the modern financial newsletter ecosystem and the reality is stark: the vast majority of publications exist to operate as perma-bulls, riding market beta and telling readers which stocks are guaranteed to go up. It is an echo chamber of consensus thinking.

I started Accrued Interest because I saw an opening in the market for true contrarians. When I began writing publicly a little over a year ago, I did not expect to make so many short calls — but I pride myself on being a contrarian and a rigorous thinker, and I let the process find me the opportunities. Today, this is the number one value investing newsletter on Substack when it comes to identifying, researching, and breaking down actionable short ideas.

Too many writers mistake beta for alpha. And most sell-side analysts at the big banks are afraid to publish an “Underperform” out of fear that management teams will stop taking their calls. My research process is 100% independent — I answer to no institution and worry about no corporate politics. The core differentiator of Accrued Interest is an unyielding commitment to a deeply researched, contrarian point of view, backed by deep-dive video analysis.

My North Star is simple: to beat the market, you have to avoid business models that are weak or prone to underperformance. The first half of 2026 proved the process works.

Identifying six idiosyncratic losers across different sub-sectors was not a lucky macro bet. The S&P 500 rallied +9.51% during the first six months of the year. Meanwhile, the six short/Underperform picks from my 12 Days of Pitch-Mas series averaged a -29.43% absolute decline. Every single pick underperformed the benchmark by a minimum of 21 percentage points. That is true alpha.

And crucially — no shade to other writers (cough, cough) — several of these underperformers were consensus favorites pitched as high-conviction longs by some of the biggest and most popular writers on this very platform. The broader market loves an easy growth narrative. But a narrative will not protect capital from structural decay.

The market desperately needs more analysts willing to step outside the safety of consensus. If you want intellectual diversity in your newsletter diet — and my honest take, always — please pledge your subscription today and support true diversity of thought.

In the spirit of intellectual honesty: this scorecard is only half the story. A Part 2 deep dive is coming where I grade my six long picks — five of the six trailed the market, mostly casualties of the macro sell-off in big tech after a blistering rally to end 2025. Subscribe and you will get those breakdowns too.

Now for the detailed scorecard.

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Now let’s go through them one by one — grouped by theme, starting with the biggest decliner in each group and working down. For each name, I will start with what I actually wrote in December, receipts first, then break down how the thesis played out.

The Illusion of Growth: Tech & Platforms

1. Fubo ($FUBO): The Death Spiral Arrived Ahead of Schedule

From the December pitch (Day 8 of Pitch-Mas):

“All 2025, I argued FuboTV was a subpar business destined to trail the market. Now, looking ahead to the media landscape of 2026, I do not think it is out of the question to ask a more fundamental question: Does FuboTV have a reason to exist much longer?”

The Scoreboard:

• Price on Dec 31, 2025: $30.24

• Price on Jun 30, 2026: $9.21

• Absolute return: -69.54%

• Underperformance vs. S&P 500: -79.05 points

This was the biggest winner on the short side; it is rare when a thesis plays out almost exactly as you expect. I flagged early on that virtual MVPDs suffer from structurally broken economics: operating as a middleman for aggressively priced sports and broadcast rights leaves virtually ZERO margin for error, and certainly no room for free cash flow generation. Every new subscriber is essentially a loss leader — one more weight on an albatross of a business with no real path to profitability.

Layer on the high-cost churn cycle — users acquired at high cost who cancel the moment promotional pricing ends or the NFL season concludes — and you have a treadmill of unprofitable customer acquisition. Without the capital backstops or bundling power of the legacy media giants, sub-scale players simply lack the leverage to negotiate sustainable carriage deals. I called it the sub-scale death spiral in December. The market caught up quite early in Q1.

Management tipped their hand to the underlying distress in March, executing a desperate 1-for-12 reverse stock split done strictly to artificially inflate the share price and avoid getting kicked off the New York Stock Exchange. As I said at the time: financial engineering is not a business strategy.

One aside: I received the most negative feedback on Twitter whenever I posted about Fubo. For reasons I will never understand, Fubo has a loyal army of Twitter trolls who appear to be addicted to pain. Part of why I opened my subscriber-only chat here on Substack was to have honest debates without feeding the trolls.

With the thesis fully realized, I officially discontinued coverage of Fubo this spring. That freed up research bandwidth for initiating coverage on a far more compelling situation — the combined Fox and Roku entity, which actually controls a dominant connected-TV distribution chokepoint rather than renting one.

The Accrued Interest Take: Thesis complete. Coverage discontinued. The best thing I can say about Fubo is that it made room on my coverage list for Fox + Roku.

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2. Duolingo ($DUOL): The Market Finally Priced the Owl Like a Mobile Game

From the December pitch (Day 9 of Pitch-Mas):

“While it still trades at an expensive growth multiple, Duolingo’s business model resembles an addictive mobile game, not a scalable educational service. This structural flaw limits monetization and future profit margin expansion. Compounding this are existential AI disruption risks and a growing reliance on lower-value international users.”

The Scoreboard:

• Price on Dec 31, 2025: $175.44

• Price on Jun 30, 2026: $115.02

• Absolute return: -34.44%

• Underperformance vs. S&P 500: -43.95 points

Let me start with a confession. I held off coming out publicly against Duolingo, partly because there were MANY Substack writers — some of whom I respect — publishing long reports on the name. Rather than argue in the comments, I decided to let my research do the talking.

And boy, am I glad I changed my mind.

Because what I learned in time is that many investors fundamentally misunderstood this business. The market was assigning a premium EdTech multiple to what is essentially an addictive, unscalable mobile game. Investors thought they were buying a scalable learning platform; in reality, they were buying fleeting screen time that faces competition on multiple fronts.

The December thesis mapped out the structural monetization hurdles the company would inevitably hit, and the prediction that they would slam into a wall on paid conversions proved accurate. I went deeper on the post-mortem in my February deep dive, Deflating the Duolingo ($DUOL) Owl, after Q4 results confirmed the cracks. Management’s subsequent pivot away from aggressive monetization toward chasing low-value free user growth was a glaring red flag — it signaled a fundamental breakdown in the long-term profitability story and confirmed the loss of pricing power.

I think the long-term bear case remains anchored in technology. The looming, existential threat of seamless AI-driven translation is actively neutralizing the core utility of app-based language learning, permanently stripping away whatever pricing power the company might still claim.

One note of intellectual honesty, because I flagged it in real time back in March: after the stock’s first-quarter collapse, I wrote that much of the bearish case had already been priced in and that I was not necessarily expecting another sharp leg down. The stock has chopped around since. But until I see acceleration in the KPIs that matter — paid conversion, ARPU, bookings — I expect continued underperformance against the S&P 500, despite the forever-optimism of the bulls.

The Accrued Interest Take: Maintaining Underperform. The gamification wall is real, and the AI translation threat is not going away. I would not be surprised to see Duolingo rally for a quarter or two coming out of earnings. However, I cannot assign an above-market P/E multiple to a business with a paid user base that cannot scale.

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3. Pinterest ($PINS): The Value Trap Sprung — Now Elliott Is Building the Exit Ramp

From the December pitch (Day 10 of Pitch-Mas):

“I am predicting Pinterest will underperform the market for 2026 because the stock is a value trap. Despite having optically healthy financials, the business has reached a growth plateau because its user mix is increasingly shifting towards international markets that monetize at a fraction of what they earn from an American or European user. In addition, Pinterest faces the risk of being a long-term ‘AI loser.’”

The Scoreboard:

• Price on Dec 31, 2025: $25.89

• Price on Jun 30, 2026: $21.04

• Absolute return: -18.73%

• Underperformance vs. S&P 500: -28.24 points

My Q4 follow-up peeled back the layers on the user metrics and revealed weak top-line growth. Pinterest’s aggressive international expansion keeps adding users who monetize at pennies on the dollar compared to the domestic base. That flood of “empty calories” is diluting overall ARPU and masking domestic stagnation. Meanwhile, shifting digital discovery habits and the accelerating threat of AI search disruption keep eroding the legacy social curation model. Today, I believe the structural thesis is intact.

But here is where the story changed. In Q1, Elliott Management injected a $1 billion strategic investment via convertible notes, triggering a large share repurchase program. And Elliott is not holding this position indefinitely. Their heavy presence all but guarantees they are forcing value creation and dressing the company up for an eventual take-private transaction or an outright acquisition to cleanly exit their position.

A structurally challenged stock can still violently pop when an activist gets involved. That asymmetry means Pinterest can no longer safely be held as a short.

The Accrued Interest Take: I am officially removing the Underperform rating and upgrading Pinterest to Market Perform. The business remains structurally challenged, but with Elliott engineering an exit ramp, the risk/reward on the short side is gone. Take the win.

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The Legacy Media & Linear Traps

4. Paramount Skydance ($PSKY): The Anatomy of a Doomed Merger

From the December pitch (Day 2 of Pitch-Mas):

“Investors were overly optimistic that a Paramount Skydance bid for Warner Bros. Discovery was a foregone conclusion, neglecting to account for the regulatory risks... Paramount’s vertically integrated structure, unlike NFLX, would invite horizontal antitrust scrutiny concerning theatrical market concentration and the consolidation of news outlets CNN and CBS.”

The Scoreboard:

• Price on Dec 31, 2025: $13.40

• Price on Jun 30, 2026: $9.86

• Absolute return: -26.42%

• Underperformance vs. S&P 500: -35.93 points

This was a deeply contrarian call — an Underperform put on directly in the midst of a $111 billion mega-merger, when the M&A hype machine was running at full throttle. The core lesson is one I will keep repeating: bolting two heavily indebted, legacy-burdened companies together does not magically fix a structurally impaired business. Mergers cannot save a flawed foundation.

The market was starved for a dissenting opinion that cut through the noise. My March deep dive detailing the eight specific reasons this merger was dead on arrival remains the single most-read piece in the history of Accrued Interest.

The weaknesses exposed in the original thesis — horizontal antitrust risk, monumental regulatory hurdles, and a crushing debt load that will strangle the combined entity’s ability to invest in streaming — remain the driving forces of the stock’s decline. And the broader market clearly shares these reservations. Despite Paramount Skydance raising its takeover offer for Warner Bros. Discovery to $31 per share, WBD currently languishes around $26. That wide spread tells you definitively that institutional capital expects severe value destruction, regulatory blockades, or both.

The Accrued Interest Take: Maintaining Underperform. The deal spread is the market’s verdict, and for now, it still agrees with mine.

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5. Disney ($DIS): The Albatross of Linear TV Is Still Around Its Neck

From the December pitch (Day 6 of Pitch-Mas):

“My core thesis is that Disney’s television networks division is too great a burden for the company to outperform the S&P 500. I consider a spin-off of Disney’s linear broadcast and cable channels to be inevitable.”

The Scoreboard:

• Price on Dec 31, 2025: $113.76

• Price on Jun 30, 2026: $96.23

• Absolute return: -15.41%

• Underperformance vs. S&P 500: -24.92 points

Unlike Fubo, this was not an overnight blow-up. Disney is a textbook case of agonizing, long-term structural underperformance. The company continually looks “cheap” on a historical basis, luring in retail investors, but because the fundamental business mix is structurally impaired, it serves as the ultimate value trap.

Bob Iger’s departure as CEO on March 18, 2026 — handing the reins to Josh D’Amaro — serves as a telling measuring stick. Despite the relentless media reverence for Iger’s leadership, the undeniable reality of the stock chart shows systematic underperformance against the broader market over the course of his combined tenure.

Even more important for the thesis: as I noted in recent Accrued Interest Daily updates, the new CEO has explicitly stated he is NOT looking to separate the television businesses. That stubborn commitment to a dying medium means the exact structural issues I identified during Pitch-Mas are locked in for the foreseeable future. Streaming margins simply cannot replace the rapidly eroding profits of the traditional broadcast and cable bundle. Management is delaying the inevitable.

The Accrued Interest Take: Maintaining Underperform. Until leadership capitulates and separates the linear businesses, expect the stock to keep drifting below the benchmark.

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6. Nexstar ($NXST): Broadcast Decline, Now Trapped in Legal Limbo

From the December pitch (Day 4 of Pitch-Mas):

“I am still bearish on Nexstar because the problems facing broadcast TV — people ditching cable for services like YouTube TV — are only going to get worse. After they buy Tegna, Nexstar will be the biggest player, which means they will be the most exposed to all these industry headaches... The stock is likely to be dead money until late 2026.”

The Scoreboard:

• Price on Dec 31, 2025: $203.05

• Price on Jun 30, 2026: $178.59

• Absolute return: -12.05%

• Underperformance vs. S&P 500: -21.56 points

I pitched this short right in the middle of a blockbuster $6.2 billion acquisition of TEGNA. Wall Street bought the promise of cost synergies and increased scale. The contrarian view correctly diagnosed that consolidating scale in a shrinking linear ecosystem is just rearranging deck chairs on the Titanic.

What the market badly mispriced was the regulatory reality. As I have highlighted in recent Accrued Interest Daily updates, a coalition of state attorneys general launched lawsuits directly targeting the acquisition, successfully freezing the integration process. Nexstar is now legally prohibited from executing on the very cost synergies they pitched to Wall Street. Their entire growth strategy is trapped in indefinite legal limbo, suffocating any potential value creation.

And there is a newer, bigger headwind emerging: political uncertainty. FCC Chair Brendan Carr has launched an aggressive campaign challenging the broadcast licenses of Disney-owned ABC stations over editorial decisions and programming. This unprecedented level of government interference creates a chilling effect that hurts the valuation of all broadcasters. If owners become terrified that the government will interfere with what airs on the public spectrum, they will hoard their highest-quality, most profitable content and move it exclusively to unregulated cable and streaming platforms. Should premium content flee over-the-air broadcast, legacy broadcasters like Nexstar will be left holding an empty vessel of low-margin filler — impairing the sprawling portfolio of local stations they are currently trapped trying to acquire.

The Accrued Interest Take: Maintaining Underperform. The melting ice cube now comes with a legal freeze on the only lever management had left.

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CONCLUSION

Six calls, six wins. The shorts gave back an average of 29% in a tape that climbed nearly 10%. That is not beta. That is not luck. That is the product of doing the work — reading the filings, building the models, and having the conviction to publish a dissenting view while the consensus was pitching these same names as can’t-miss longs.

And as promised, transparency cuts both ways. Part 2 of this scorecard will cover the long side of the Pitch-Mas ledger, where the first half was far less kind. I still consider those names good buys, and I will explain why in the next edition.

One housekeeping note: Accrued Interest officially launches paid subscriptions on July 22. The Founding 100 pledge window — which locks in the Portfolio Manager tier at $199/year for life — is open now, and the subscriber chat is running as a free open house until launch day. If independent contrarian thinking is the kind of research you want in your corner for the second half, now is the time.

More to come — stay tuned 👀

-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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Today Kicks Off the Biggest Change in Accrued Interest History

For more than a year, I’ve published institutional-grade research on the companies that make, move, and monetize attention — the melting ice cubes, the toll collectors, the evolutions the Street hasn’t priced yet. Regular readers have watched the coverage universe grow and my investing frameworks sharpen. I am INCREDIBLY proud of the body of work I have produced on Accrued Interest since I launched the substack in Spring 2025.

Today, after a long road, I am finally making Accrued Interest a business!

On July 22, I’m launching paid subscriptions — with more research, more video, and more access than this publication has ever offered. Here’s everything you need to know, starting with the part that rewards the people who’ve been here from the beginning, my Day Ones.

You’re Reading This in Better Company Than You Think…

Before I give the high-level details of the subscription tiers, here is something I’ve never shared publicly…

Accrued Interest is read by professionals at Goldman Sachs, Citadel, D. E. Shaw, Fidelity, T. Rowe Price, and AllianceBernstein, among others. I have at least 100 different financial insitutions in the current subscriber base!

It’s read at 32 academic institutions around the world — from Columbia Business School and Wharton to Chicago Booth, the Indian Institutes of Management, Seoul National University, and Nanyang Technological University in Singapore.

I share this for one reason: the research you’ve been getting for free is the same research sitting in inboxes at some of the sharpest firms on Wall Street. That’s the work going behind the paywall on July 22 — and the readers who pledge first keep the lowest price it will ever have.

The Founding 100: My Day Ones Get the Best Deal I Will Ever Offer

Between now and July 22, you can pledge your subscription — and the first 100 pledges lock in $199 per year, for life. That’s 20% off the launch price, and it never expires. As long as you stay subscribed, your price never goes up. Ever.

Two things to know about pledging:

• Your card will not be charged until July 22. A pledge simply reserves your seat — you enter your payment details today, and nothing happens until launch day.

• When the 100 seats are gone, they’re gone. And I want to be direct about this: I will not be running discounts throughout the year. No holiday sales, no win-back offers, no “last chance” emails in November. This is not a sale — it’s a founding honor, offered once, to the readers who showed up before the paywall existed. If you’ve ever planned to support this work, this is the moment that rewards you most for it.

Thank you to all my Day Ones!!!!

In Honor of America’s 250th: Seats 101 — 250

After the Founding 100 fills, the next 150 subscribers — seats 101 through 250 — lock in the launch price of $249 per year, for life. America turns 250 this year; the first 250 members of Accrued Interest keep their price forever. After seat 250, pricing adjusts closer to market.

The math is simple: the earlier you commit, the better your price — permanently.

What Portfolio Managers Get

Every paid subscriber joins as a Portfolio Manager. Here’s the high-level view (deeper dives on each benefit coming over the next two weeks):

• The full archive. Every deep dive, every initiation, every valuation — unlocked.

• The subscriber chat. Quick takes, live reactions, and real-time Q&A. The chat is open to everyone, free, until July 22 — come see what it’s like inside before it becomes a paid room.

• The Accrued Interest Town Hall. A monthly live session where I answer subscriber questions and preview the work in progress — the pitches and models you’ll read about before the Street does.

• All long-form video. After launch, full-length video content is for paying subscribers — and yes, that means the podcast is coming back.

The Partner Class: 25 Seats

For those who want everything above — plus access to my time — there’s the Partner tier at $995 per year, capped at 25 seats.

Partners get every Portfolio Manager benefit, plus the ability to book private 1-on-1 calls with me. It’s the closest thing to having Accrued Interest on your speed dial. Twenty-five seats, no exceptions — when they’re claimed, the class is closed.

More details to come on the Partner Class…(email me at simeon@accruedint.com with the subject line “Accrued Interest Partner” with any questions).

Accrued Interest Institutional

One more launch, and this one is not a Substack subscription.

Accrued Interest Institutional is for funds, firms, and investors who need bespoke, project-based research — commissioned deep dives, industry landscape work, diligence support. If that’s you, email me at simeon@accruedint.com with the subject line “Accrued Interest Institutional” and tell me what your project needs are. I respond within 48 hours.

The New Publishing Schedule

Starting this month, the cadence sharpens:

• Deep Dives: Wednesdays. The long-form research this publication is built on: initiations, valuations, and an operator’s perspective you won’t get anywhere else.

• The Weekly Cypher: Moving to the weekend. The week-in-review rundown covering the full coverage universe now lands Saturday/Sunday. And let me be unmistakably clear: the Cypher stays 100% free. Always. If you never pay a dime, you’ll still get it every weekend.

How to Claim Your Seat

1. Tap the Pledge button on this post or on the Accrued Interest homepage.

2. Choose the annual plan — $199, locked for life if you’re in the first 100.

3. That’s it. Your card isn’t charged until July 22.

One hundred seats. Then 250. Then the price moves.

Thank you — genuinely — for reading, sharing, and pushing this publication to this moment. The first year was the proof of concept. This is the era where it compounds.

Your support means the world to me. I aspire to make Accrued Interest the #1 place for tech and media value investors on the web. Building a strong subscriber base in year 1 will help achieve this goal.

— 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 (free) to read the rest of this Accrued Interest deep dive. I send these to 1,400+ investors and operators who care more about what really moves the needle than what the spreadsheet whispers.

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1. Follow the Earnings, Not the Noise

Narratives shift. The media noise does not stop. But if you want to know where a stock is going over time, you follow the earnings. That has been the North Star here at Accrued Interest, and it is the lens I want to bring to this morning’s news on Meta.

Before the market opened on July 1, Bloomberg reported that Meta is developing a cloud infrastructure business to sell access to AI computing power and models. Two paths are on the table. The first is selling access to models hosted on Meta’s own infrastructure — including its Muse Spark models — in a setup that resembles AWS’s Bedrock. The second is selling access to raw computing capacity, closer to what a neocloud like CoreWeave does. Both sit inside an internal effort called Meta Compute, led by infrastructure head Santosh Janardhan, Superintelligence Labs’ Daniel Gross, and Meta President Dina Powell McCormick. The market’s reaction told you how it read the headline: Meta rallied more than 11% on the day to around $627, while CoreWeave fell nearly 10%.

I want to put that move in context, because I have been beating this drum all year. Through the first half of 2026, while plenty of investors turned skittish on the AI spend and pushed the stock down toward its 52-week lows, I kept my Outperform rating in place. Today’s rally is the market starting to catch up: with this pop, Meta is now down only about 5% year-to-date, clawing back a good chunk of the underperformance that had built up over the past six months.

I don’t think that repair is finished.

Now the reframe, because this news is being read two ways, and both are off. The bears see Meta flooding an already-nervous compute market, which is why the neocloud names sold off. Others see Meta pivoting into a non-core business — chasing Azure and AWS, straying from what it does best: serving digital advertising at scale. I think it is neither. What Meta is describing is a release valve for its AI infrastructure spend — a way to monetize excess, already-funded capacity at a high margin when internal demand does not consume all of it. Read that way, this news does not add to the CapEx worry. On the contrary, I think it is an answer to it.

2. Meta Has Been Signaling This for Three Quarters

This was not a reactive pivot dreamed up to appease Wall Street. Management has been laying down breadcrumbs for the better part of a year, and if you were listening to the calls, none of this should surprise you.

Start on the October 29, 2025 Q3 earnings call. With CapEx fears already building, Zuckerberg floated the idea plainly: “Obviously, if you got to a point where you overbuilt, you could have that as an option.” That was the first public hint that overbuilding was not a risk to fear but an option to hold.

By the April 29, 2026 Q1 call, and again at the May 27 annual shareholder meeting, he revealed where the demand was coming from: “Almost every week there are different companies that come to us from the outside asking us to both stand up an API service or asking if we have compute that they could buy from us at some premium to what we’ve bought it at.” That is not Meta hunting for customers. That is inbound demand showing up on its own, at a premium.

Then, at that same May meeting, asked directly about competing with Amazon and Microsoft in the cloud, Zuckerberg confirmed that selling excess compute is “definitely on the table.” So by the time this morning’s report landed, the only new information was that the plan now has a name and an org chart.

The strategy itself has been public for three quarters. The reaction you are seeing in the market is a reminder that not all publicly available information has already been “priced in” by Mr. Market.

3. The Compute Math: A Release Valve, Not a Dead Asset

To move from narrative to numbers, I want to walk through an exhibit I came across from a recent Wells Fargo note. (A quick note to readers: I found this as a clip on Twitter, so if you have the full research note, please send it my way!)

One of my favorite quotes about investing comes from the statistician George Box, and I keep coming back to it: all models are wrong, but some are useful. That is the way to view this Wells Fargo math. The direction is what matters, and it is hard to ignore.

Start with the capacity picture. Wells Fargo maps Meta’s total end-of-period power footprint growing from 7.5 GW in 2025 to 21.2 GW by 2028. What makes the exhibit useful is that it splits that footprint into two buckets.

1. Internally focused capacity — the power that keeps the core ads and recommendation engines running — grows at a steady, unremarkable pace: 6.0 GW in 2025 to 8.0 GW in 2028.

2. The AI-focused capacity is the surge that has spooked the market: 1.5 GW in 2025, then 5.7, 10.5, and 13.2 GW through 2028.

That split tells you management is not spending blindly. They can see, granularly, what is required to protect the core business versus what is forward-looking AI optionality.

Now the unit economics. Wells Fargo reverse-engineers what happens if Meta peels off a single gigawatt of that AI capacity for third-party resale. From their exhibit, I pulled the following values to make the point:

The number that carries the argument is the 85% operating margin. It is that high for one reason: the infrastructure is already paid for. The CapEx cycle funded the buildings and the silicon, so the incremental cost of letting an outside developer run workloads on capacity you were not using is low. And note the scale of what is being modeled — one gigawatt out of a projected 13.2 GW AI footprint. Reselling under a tenth of the excess adds roughly $5.69 to EPS and a 16.3% bump to the FY27 consensus. I am not claiming Meta resells one gigawatt at $20 billion per gigawatt on any set schedule; uptake and pricing are open questions. The point is that even a fraction of this capacity, monetized, moves the earnings line in a way the current CapEx panic does not contemplate.

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4. “Building a NeoCloud and Renting Capacity Aren’t Contradictory”

Here is the obvious pushback, and it deserves a real answer. If Meta has surplus compute to sell, why did it recently lock in another 1.6 GW from Crusoe across data centers in Childress, Texas and Warrenton, Missouri? Isn’t reselling compute a sign that demand has peaked?

Before I lean on the best answer I have read to that question, let me give Funda AI their flowers. Their research on Meta — and across the broader tech and AI-infrastructure names — has been some of the most consistently sharp work I follow. I am pointing you to their note because they framed this issue better than I could, and I would rather credit their thinking than repackage it as my own. The piece is titled “META: Building a NeoCloud and Continuing to Rent Capacity are not Contradictory,” and the title is the thesis.

Their read, which I share, is that this is not a story about AI compute demand peaking, but a generational shift in what compute is for. Over the past two years Meta bought and deployed large quantities of H100 and H200 GPUs. Those chips are far from worthless — they remain valuable for inference, fine-tuning, enterprise model serving, image and video generation, and traditional ML. But for training the next generation of frontier models — 3T-plus-parameter mixture-of-experts, long context, RL-heavy post-training — the cost per effective token on H100/H200 rises meaningfully versus GB200, GB300, and the coming Vera Rubin systems.

That leaves Meta with a classic asset-allocation problem. Reserve the newest, scarcest silicon for frontier training; shift the prior-generation fleet toward inference or external monetization. Seen this way, the Crusoe lock-in and the neocloud plan are not in tension — they are two sides of the same decision. The 1.6 GW from Crusoe is strategic supply for the GB200/GB300/Rubin era. The resale plan recycles capital tied up in the H100/H200 fleet that no longer belongs at the frontier. It is the same logic xAI has already run in public: it rented Colossus 1 compute — a cluster of more than 220,000 NVIDIA GPUs spanning H100, H200, and GB200 — to Anthropic while keeping its newest clusters for its own models. Bloomberg Intelligence estimates that strategy could drive xAI past $50 billion in revenue by 2028.

And if you want hard evidence that there is no glut for Meta to worry about, look at what the Financial Times reported on June 28, three days before this morning’s news. Google has capped Meta’s use of its Gemini models.

Per the FT, Google told Meta back in March that it could not supply all the capacity Meta wanted to buy, and those limits remain in place, disrupting some of Meta’s internal AI work. One of the largest, best-capitalized infrastructure owners on earth had to ration a marquee customer because it could not meet demand. Google’s own CEO said it plainly on the April call: “Obviously, we are compute-constrained in the near term.” Compute is the scarcest input in tech right now, not a surplus commodity — and that fact was reported days before the market decided Meta’s plan spelled oversupply.

That is why I think the bearish read on this morning’s news — Meta enters the neocloud space, therefore the neoclouds get crushed — is overdone. As the Funda AI note frames it, the compute market is moving from a single, undifferentiated GPU shortage into a phase of tiered pricing and tiered usage across chip generations. Older GPUs do not go to zero, and the newest GPUs stay scarce. Meta building a neocloud is not a signal that demand has collapsed. It is a signal that compute assets are being financialized — turned from a single-use training tool into a multi-generation, income-producing asset.

5. Mr. Market’s Operational Blind Spot — and the $1,116 Bridge

So why does Meta’s potential keep getting underrated? I think the analysts largely have this right — earlier in this piece I leaned on their own consensus to show how accretive the resale math would be. But Mr. Market, whose mood swings move the stock day to day, tends to misjudge Meta, and I think it is because most investors are spreadsheet jockeys who have never had to actually run a small business.

Meta’s margin story was built on self-service. Unlike legacy media or bloated enterprise-software companies, Meta never needed a large, expensive direct sales force. Millions of businesses log into the same dashboard, configure their own campaigns, and buy their own inventory — the software does the selling. That is the mechanism that allowed the company to scale revenue for years without scaling headcount at the same rate.

AI compute and hosted agents are the next generation of tools in that same dashboard. Giving a business API access to Muse Spark inside the interface it already uses every day is a low-friction upsell to a captive base, not a ground-up enterprise sales campaign against AWS. If you have never sat on the other side of that dashboard — buying ads to keep a small business alive — it is easy to miss how sticky and how natural that upsell is. That is the truth the market keeps discounting: it treats the AI spend as pure cost rather than the plumbing for the next set of high-margin tools.

This is where the compute plan connects to work I have already done. In “Back to the EBITDA: Decoding Meta’s $1,116 Executive Playbook,” I walked through the board-approved executive option packages, which do not begin paying out until the stock clears an absolute floor of $1,116.08 by February 2028, with higher tranches escalating well beyond that. Hitting the EPS required to justify that price is not something the core ad business does on its own; it requires new, high-margin revenue lanes. The compute resale model is a tangible one. Wells Fargo’s roughly $5.69 of incremental EPS from a single gigawatt is not the whole bridge from today’s $627 to a $1,100 handle — but it is a visible plank in it, and this morning I learned the company is building it.

Conclusion — The Setup Into Earnings is Attractive

Meta’s Q2 2026 results are expected at the end of July. My discipline has not changed: I do not make large portfolio moves ahead of the conference call.

But I will tell you how I read the timing. Companies do not surface plans like this from a position of weakness. Meta is letting these details out because it is confident in the underlying business. My expectation is that the upcoming Q2 earnings will confirm it — that the revenue acceleration we saw in Q4 2025 and Q1 2026, up roughly +33% year-over-year, is still intact. I think investors will soon be reminded that the earnings-growth case is stronger than many of them currently believe.

On valuation, I won’t bury the lede — Meta is still trading like a cheap value stock. As of early July, the consensus GAAP EPS I am working from (TIKR, shown in the exhibit) is $34.97 for 2027 and $40.55 for 2028. Against Meta’s prior close of $563, those estimates put the stock at about 16.1x 2027 and 13.9x 2028 earnings. Even after today’s 11% run to $627, Meta trades at only around 17.9x 2027 and 15.5x 2028 GAAP EPS. A mid-teens multiple on 2028 earnings, for a business still growing its top line north of 25%, is not an expensive stock. As I have argued before, I think these consensus numbers are still too conservative, which leaves Meta plenty of room to keep proving its doubters wrong.

Strip away the noise and the setup is straightforward. If internal products absorb the compute, the ad machine keeps compounding and pays for the buildout. If Meta overbuilds, it monetizes the excess at a high margin into a market that — as Google just reminded us — cannot get enough of it. Both roads are friendly to shareholders, and that is what a hedge is supposed to look like.

I am maintaining my Outperform, and I will be tuning in to earnings with great anticipation.

Relevant tickers: , , ,

— 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 (free) to read the rest of this Accrued Interest deep dive. I send these to 1,400+ investors and operators who care more about what really moves the needle than what the spreadsheet whispers.

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Introduction

This one hits close to home. I began my career as a TMT analyst at Goldman Sachs from 2008 to 2010, sitting a few seats from the team grinding through the original Comcast–NBCUniversal acquisition — the deal that defined the “content meets distribution” paradigm the entire media industry has been organized around ever since. So when Comcast announced on its 8:30 AM investor call this morning that it was spinning off NBCUniversal and Sky into a separate public company, it felt like a full-circle moment. The experiment I watched get built at the start of my career is now being taken apart, in public, and — ironically — by the same people who built it.

This is a first take, written hours after the announcement with only a thin investor deck to go on. But the strategic message is loud and clear. I’ve laid out my Top 10 takeaways below so you can follow exactly how I’m thinking — and let me know where you disagree.

Let’s dive in.

The Deal, in Plain Terms

In case you haven’t heard by now, here is what was announced this AM:

• A tax-free spin-off of NBCUniversal (including Sky, the European media and pay-TV business) into a separate, publicly traded company.

• 12-month timeline, targeting completion around June 2027. (No shareholder vote required.)

• NBCUniversal keeps the crown jewels: Universal’s film and TV studios, the theme parks (including the brand-new Epic Universe), the NBC broadcast network, Telemundo, Bravo, Peacock, and Sky.

• Comcast keeps the pipes: Xfinity broadband, wireless, business services, and the nation’s largest converged network passing more than 65 million homes and businesses.

• Leadership: Mike Cavanagh becomes CEO of the independent NBCUniversal. Former CFO Michael Angelakis returns to run Comcast. Brian Roberts stays Chairman and remains involved in both. And — this matters — Marci Ryvicker, Comcast’s head of Investor Relations and a former top-ranked TMT sell-side analyst, is clearly the architect of how this story is being told.

• Comcast will retain up to 19.9% of NBCUniversal, to be sold off for cash over time in a tax-efficient way and used to pay down debt.

• Comcast is suspending its share repurchase program, redirecting that cash to set up both companies with strong, low-debt balance sheets from day one.

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1. This Is a Retreat, Not a Bold New Strategy

I spent more than a decade building investor decks like the one Comcast put out this morning, so let me translate what management is thinking but can’t say outright.

This is a capitulation — a graceful one, wrapped in the language of “enhanced strategic focus,” but a retreat all the same.

About fifteen years ago, Comcast made the bet that owning both the content (NBCUniversal’s shows, movies, and channels) and the pipes (the cable operator that carries them into your home) would make each side stronger. The idea was that the pipes would always have something to sell, and the content would always have a guaranteed way to reach homes. Now, I am leaving a lot out, but this was the entire “convergence” strategy in a nutshell.

Today, Comcast effectively admitted the synergies never showed up.

To see how sharp the reversal is, rewind just seven months. Back in December 2025, Comcast spun off Versant Media, which was a hodgepodge of assets but consisted mostly of its weakest and fastest-shrinking cable networks. (Please see the Accrued Interest archives for my extensive coverage on Versant - Underperform.)

The pitch at the time leaned on the idea that what stayed behind inside NBCUniversal — the theme parks, the studios, Peacock, the NBC network — were the crown jewels, and that they were better attached to Comcast’s broadband cash machine.

Seven months later, the good stuff is being shown the door. You cannot defend “content and distribution belong together” for fifteen years, reaffirm it in December, and then quietly reverse it in June without investors noticing the whiplash.

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2. The Two Spin-offs Were Always One Plan

Here is how I read the sequence: the Versant spin and this NBCUniversal spin were never two separate decisions. They were one decision, executed in two stages. First you clear out the assets nobody wants to own — the melting-ice-cube cable networks — and package them into Versant. Then, once the portfolio is clean, you cut loose the genuinely valuable media assets so the market can price them on their own merits. I think of the Versant spin-off back in December almost like a garage sale, whereas the NBCUniversal spin-off news in June is more like an estate sale.

So why would Comcast bother splitting at all? Because of something called the conglomerate discount. In plain terms: when one company owns a grab-bag of very different businesses, the stock market often values the whole thing at less than the pieces would fetch separately. An investor who wants a clean, growing broadband stock doesn’t also want a shrinking-TV business stapled to it, and an investor who wants media exposure doesn’t want it watered down by a capital-heavy utility. So the good business gets dragged down by association with the weaker ones, and the share price reflects the muddle. Splitting them up is how you make that discount disappear.

Marci Ryvicker leading IR over at Comcast is something I want to call out. When you hand investor strategy to one of the most respected former sell-side TMT analysts on the Street, that’s worth noting. This is a decision made by people who know exactly how investors value a high-margin theme-park business versus a declining cable channel versus a broadband utility, and who concluded the parts are worth more than the whole.

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3. The Real Prize Is the Pipes, Not the Pictures

Here is the part I think a lot of the media-focused coverage will underweight today: for many investors, the most important company created by this deal is the one keeping the Comcast name.

The tape tells the story. Here is roughly where the relevant names sat in mid-afternoon trading on June 29, 2026 (sorted from biggest winner to biggest loser):

• Comcast (CMCSA): $24.63, +6.3%

• Charter (CHTR): $146.03, +9.3%

• S&P 500: 7,435.97, +1.1%

• Versant (VSNT): $36.12, −0.1% (essentially flat)

• Verizon (VZ): $43.71, −6.1%

• AT&T (T): $21.70, −4.5%

• T-Mobile (TMUS): $175.25, −4.1%

A few things stand out. Comcast jumped on the news, though it gave back a good chunk of its gains after gapping up toward $27 at the open. Charter rose sharply on M&A speculation, with traders betting a streamlined Comcast might finally try to roll up the rest of the cable industry. The other carriers — Verizon, AT&T, and T-Mobile — fell on the opposite fear: that a leaner, more focused Comcast means tougher competition ahead in broadband and wireless. And Versant actually slipped, slightly underperforming an S&P 500 that was up about 1% on the day. It’s a small move, but a telling one — it says the market doesn’t see this separation helping Versant’s investment case, exactly as I’ve argued.

4. A Leaner Comcast Is a Bigger Threat to the Phone Companies

The reason the wireless carriers sold off is just as revealing as Comcast’s pop.

Some background: for the last couple of years, Verizon and T-Mobile have been quietly peeling home-internet customers away from cable using something called fixed wireless access — internet delivered over the same cellular network that powers your phone, instead of through a cable wire. It’s cheap to roll out and it’s been a genuine headache for cable.

Now picture a slimmer Comcast that is no longer funneling billions into an expensive Hollywood arm. All that freed-up cash can go toward fighting back. That is precisely the threat the market is pricing this afternoon — a more focused, better-funded Comcast.

A caveat: on Accrued Interest I don’t really cover the telecom names (Verizon, AT&T, T-Mobile, etc.), nor am I staking out a view for or against any of them. What I’m describing is how Mr. Market is reading the news this afternoon: that a leaner, better-funded Comcast could compete harder against the telcos.

5. NBCUniversal Comes Out a Predator, Not Prey

This is where the deal structure gets genuinely interesting, and where I think the smart money will spend the next two years.

If you spin a business off tax-free and then it gets acquired within two years, the IRS assumes you secretly planned to sell it all along — and hits the parent company with an enormous tax bill. So in practice, nobody can simply buy NBCUniversal outright until roughly 2029.

But that rule does not stop NBCUniversal from being the buyer, so long as NBCU ends up owning more than 50% of whatever it merges with. So post-spin, NBCU should have a (relatively) clean balance sheet, freshly minted stock to use as currency, and the freedom to go shopping from a position of strength — unburdened by the declining cable networks already carved out into Versant.

And it isn’t only about outright acquisitions — the spin-off also frees NBCU to strike creative partnerships and joint ventures. There are more media “free agents” floating around than ever — companies that have been spun off, broken up, or quietly put on the block. The flexibility to work more closely with companies such as the newly combined Paramount/WBD is exactly what this structure is built to enable.

On the perennial Netflix chatter: I continue to take Netflix at its word that it isn’t interested in big legacy-media deals. Warner Bros. Discovery was the real wild card, which PSKY bid aggressively to win. While PSKY may eventually need to sell assets to pay down its heavy debt load, I wouldn’t expect NBCU to rush into buying more linear networks the moment it becomes independent from Comcast.

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6. Don’t Bet on a Comcast–Charter Merger

Charter ripping more than 9% today tells you that some traders were already dreaming about a streamlined Comcast rolling up the rest of the cable industry. Let me pump the brakes.

Now, while I am no antitrust expert, a Comcast–Charter combo would bring together two of the largest internet providers in the country. And that would mean a brutal antitrust fight in Washington that I think would be difficult to overcome. On top of that, the bigger these companies get, the less extra savings they actually squeeze out of merging, so the M&A synergies shrink even as the regulatory risk grows. And Charter already has its hands full digesting its combination with Cox. The new structure gives Comcast the flexibility to do a big deal if sentiment shifts, but near-term I would not expect an imminent acquisition. And to be clear, this isn’t me starting coverage on Charter — I’m simply explaining why I wouldn’t chase today’s pop on merger speculation alone.

7. Sky Gives NBCUniversal the European Footprint It Lacks

Sending Sky — the European pay-TV and media business — off with NBCUniversal rather than keeping it inside Comcast may have confused some people, but let me explain why it makes sense for two reasons.

The first is housekeeping: a European pay-TV operator has no place inside a clean, domestic U.S. broadband utility; it would muddy the exact story this whole deal is engineered to tell. The second, and more important, is that Sky helps give NBCU a presence in Europe. As a media company, NBCUniversal has very little footprint across the Atlantic on its own. Sky brings roughly 17–18 million existing customer relationships across the UK, Germany, and Italy, plus the billing systems and distribution pipes to reach them. That hands a standalone NBCUniversal an established on-ramp to put Universal’s movies and its streaming content in front of European audiences, without having to build a customer base from scratch. The launch of SNL UK on Sky was an early taste of this. For a media company that needs international scale to stay relevant, Sky is the European foothold NBCUniversal couldn’t build on its own.

8. “Stronger Apart” Doesn’t Add Up for the Media Side

The Comcast spin-off deck today claims both companies will be stronger apart than together. For the broadband business, I buy it. But for NBCUniversal, I find it genuinely hard to believe.

A TV and media business carries enormous fixed costs; you pay for the shows and the sports rights whether 8 million or 10 million tune in. So when revenue dips a little, profit drops a lot (and the same works in reverse on the way up). Tucked inside Comcast, NBCUniversal had a giant broadband cash flow acting as a shock absorber. On its own, NBCU’s profits will be more volatile.

The clearest example of the potential dis-synergies is in sports. Bidding for the Olympics or the NFL packages is an arms race, and Big Tech has shown up with effectively bottomless pockets. Competing for those rights without Comcast’s balance sheet behind you is a much harder game. I’d expect NBCU to need creative partnerships just to stay at the table.

9. The Carriage Wars Are Coming — and Versant Is the Loser

There’s a quieter consequence here, and it loops back to Versant. Pay-TV distributors and the networks they carry renegotiate carriage fees every few years, often in tense standoffs. Right now, Comcast’s distribution arm and NBCUniversal’s networks are on the same side of that table; once they’re separate companies, those negotiations may turn cold and adversarial. I wouldn’t be surprised to see Comcast one day play hardball with both NBCUniversal and Versant.

To be clear, I don’t mean tomorrow. This won’t really come to a head until Comcast is fully separated from both companies, which realistically isn’t until after 2029. But once that happens, Comcast has no structural incentive to go easy on either one — especially as YouTube TV increasingly becomes the fastest-growing pay-TV distributor. That’s what makes me more bearish on the standalone Versant networks over the long run, not less. The VSNT networks were carved out precisely because nobody wanted them inside the new NBCUniversal, and eventually they’ll be negotiating carriage in a colder world. Tellingly, Versant’s own stock stayed basically flat while Comcast popped — a sign the market doesn’t see this separation as any kind of benefit for the VSNT channels Comcast already showed the door.

10. Disney Is Making the Opposite Bet — and I Think It’s Wrong

I can’t close the arguments without the strategic fork between Comcast and Disney.

The timing is almost poetic. Just as Comcast is breaking itself in two, the Wall Street Journal published a feature this past weekend on the new Disney CEO’s first 100 days in the job (Josh D’Amaro Is 100 Days Into His Mission to Make Disney Faster and Fiercer), and the throughline was the opposite instinct. D’Amaro is doubling down on keeping ESPN and Disney’s linear networks bundled inside the mothership, pushing back on the very calls to spin off ESPN that Comcast effectively just answered for its own assets. Two companies, staring at the same decline of traditional television, reaching opposite conclusions about what to do about it.

Comcast’s willingness to act this decisively makes me think Disney is on the wrong side of the trade. I’ve held an Underperform rating on Disney since Dec 2025, and if anything, today’s news adds to my conviction.

Conclusion

This is the most consequential TMT breakup in years, and a genuine inflection point for the industry. From here, I’ll be watching for the standalone NBCUniversal financials and more information about the spin-off. Zoom out, and the bigger story is that this deal drops another free agent into a rapidly changing media industry. A newly independent, well-capitalized NBCUniversal — free to buy, partner, and deal — sets up a great deal more strategic activity across media and telecom over the next few years. This is going to be one of the most fascinating things to watch.

For now, that’s my initial take. I’d love to hear yours. Let me know in the comments and thank you for subscribing and supporting my work!

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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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From Strategic Logic to Hard Math

In Part 1, “Fox + Roku: A Brilliant Pivot from the Cable Bundle to the Living Room,” I walked through Fox’s strategic masterstroke: trading its reliance on the dying linear cable bundle for direct control over connected-TV distribution, right as CTV’s share of the TV ad pie raced past 40%. The Murdochs sold entertainment cable to Disney at the top in 2019, and they are deploying that capital into the dominant CTV platform at the bottom.

In Part 2, “The Strait of Roku,” I argued that Roku controls the definitive chokepoint of the living room. It is the front door to streaming for tens of millions of American households, the one piece of real estate where content discovery actually happens, and it has held that ground against Amazon and Google for over a decade.

Now for Part 3, I will give you my take on what I think Roku is actually worth, and why I think Fox is not overpaying.

Mr. Market has the valuation backwards, but the skepticism is understandable, and I want to be fair to it. This deal will not close until the first half of 2027. Bank of America’s Jessica Reif Ehrlich has a Sell on Fox and warned about a “catalyst gap,” the better part of a year where capital is tied up just to earn a single-digit arbitrage spread. As a trade, I understand the hesitation. But the arbitrage spread tells you nothing about what this asset is worth in 2028. The distance between what the market is reacting to today and the FCF this combined company will actually generate is the entire opportunity.

Now let me explain exactly why I am comfortable disagreeing with Mr. Market.

The Deal Got Cheaper While Nobody Was Looking

Let’s start with what Fox is really paying today, because the headline number is stale.

The deal was struck at $160 per Roku share, a roughly $22B enterprise value, financed 60% cash and 40% Fox stock. But 40% of the consideration floats with FOXA, and FOXA has kept falling. As of June 25, 2026, Fox trades at $48.90 and Roku at $135.01. Run the current math and the implied offer is no longer $160.

Roku is trading at $135.01 against a $143.39 implied price, which is your roughly 5.8% arb spread right there. Look at what has happened to the acquirer’s cost. Because Fox’s stock has sold off from its $66 reference price, the equity portion of the consideration has compressed, and Fox is now effectively acquiring Roku for about $19.5B in enterprise value instead of the $22B everyone keeps quoting. The acquirer’s stock falling has made the asset cheaper. That is the number every multiple in this piece runs against: $19.54B in implied EV, $21.28B in implied market cap.

I want to give Fox credit for how it structured the deal in 60% cash, 40% stock. Paying the majority in cash means Fox is not giving away the upside. Roku shareholders will own only about 27% of the combined company, which leaves roughly 73% of every future dollar of synergy and growth in the hands of Fox. Had Fox financed this entirely in stock, it would be handing a far bigger slice of the prize to the other side of the table.

And the 40% stock piece quietly does something else that is playing out in real time: it turns the purchase price into a floating number that falls when Fox stock falls. So the very sell-off that has investors nervous is, mechanically, lowering the effective price Fox pays for Roku. The market’s skepticism is discounting the deal for the buyer.

Across the three scenarios I am about to walk through, that roughly $19.5B price works out to somewhere between 11x and 15x the free cash flow this asset generates in 2028, before a single dollar of revenue synergy. Hold onto that range. It is the whole argument, and everything below is just me showing my work.

The Operator’s Lens: Three Scenarios for 2028

Before I show you the scenarios, here is the lens I built them through. I forecast this the way an operator would think about the business, from the segment level up, with conservative assumptions anchored to targets Roku management has already put on the record.

The engine of the entire model is Roku’s revenue mix.

Devices, the streaming sticks, are a deliberate loss leader that Roku runs at a negative gross margin to pull households into the ecosystem.

Platform, the advertising and subscription tollbooth, is where the money actually lives, at roughly 51% gross margins.

As the low-and-negative-margin hardware shrinks and the high-margin platform dollars grow, the blended margin expands on its own and falls straight to the bottom line. That is the whole cash flow story, and the beauty of it is that you do not need aggressive top-line growth to make it work.

I decided to model three scenarios.

1) The Operational Floor asks what Fox is paying if Roku merely limps to its own stated target.

2) The Execution Midpoint asks what happens if Roku keeps a fraction of the advertising momentum it is already posting.

3) The Integration Flywheel asks what happens once Fox’s content starts actively driving Roku’s subscription engine. For each one, I will show you the price Fox is paying on a standalone basis, and then once you layer in the merger’s cost synergies.

(Two housekeeping notes on the math, because I would rather be conservative than too cute. First, every growth rate I cite is a three-year compound annual rate measured from Roku’s 2025 base out to 2028, a ’25–’28 CAGR. Second, Roku carries a low cash tax rate today thanks to its accumulated net operating losses, which I reflect in the standalone cases, and I tax the merger synergies at a full 25% corporate rate before counting them as cash.)

Scenario 1: The Operational Floor. Even Hitting the Bare Minimum, Fox Is Paying a Fair Price

The premise here is deliberately pessimistic. I am anchoring to the one forecast number Roku management has repeatedly committed to in public: $1.0 billion in standalone free cash flow by 2028. I consider this the baseline case.

To get there, I do not need heroic growth. I need $6.5B in total 2028 revenue, an 11.1% compound rate off Roku’s 2025 base of $4.73B. Remember, Roku grew platform revenue 28% year over year in Q1 2026. This model assumes that blistering pace nearly halves into the low double digits and the company still clears a billion in cash, purely on the strength of the mix shift.

Devices keep shrinking to $400M and keep running at a deliberate negative 10% gross margin. Remember, that hardware loss is a feature, not a bug. Roku eats it to acquire households and feed the ecosystem. Meanwhile Platform, the actual tollbooth, grows to $6.1B on decelerated-but-steady advertising (13.2% CAGR) and subscriptions (12.3% CAGR).

So what does that buy Fox? On the standalone $1.0B, Fox is paying 19.5x EV/FCF and 21.3x price-to-FCF. Layer in the $300M of post-tax cost synergies the merger unlocks and the pro-forma multiple drops to 15.0x EV/FCF and 16.4x P/FCF.

Let me reiterate, this is the conservative case. This is Roku’s current growth trajectory halving, barely limping to its self-imposed floor. And even here, Fox is paying roughly 15x cash flow for a platform that owns 100 million households and 44% of all U.S. CTV viewing hours, about 3x its nearest competitor. 15x free cash flow for a dominant tech platform is not expensive, it is a fair market price. And I believe the downside is heavily protected.

Scenario 2: The Execution Midpoint. A Little Ad Momentum and the Multiple Drops Below the S&P

Now in my second scenario I give Roku a fraction of the momentum it actually showed in its most recent print, and only on the advertising line. Nothing else changes from the base case.

In Q1 2026, Roku advertising grew 27% year over year. My baseline assumed that decelerated to 13.2%. For the midpoint, I split the difference and model a 17.8% ad CAGR, which is still a sharp slowdown from the current run-rate. That lifts 2028 advertising to $4.5B and total revenue to $7.0B, almost exactly the Street’s consensus number, though I get there through high-margin advertising rather than hardware, which means meaningfully cleaner cash conversion.

The reason this matters so much is operating leverage. That incremental $500M of ad revenue is not like incremental hardware revenue. Once the fixed costs of the platform are covered, advertising dollars are intensely cash-generative. I add a little variable OPEX for sales commissions to be realistic, and the rest falls to the bottom line.

Raising one growth assumption by a few points moves standalone free cash flow from $1.0B to $1.23B, a 23% jump. That is the asymmetry of this business in a single number. On the standalone $1.23B, Fox is paying 15.9x EV/FCF and 17.3x P/FCF. With the cost synergies layered in, the pro-forma multiple compresses to 12.8x EV/FCF and 13.9x P/FCF.

Roku does not have to be a rocket ship. It just has to execute moderately well on monetizing its new homescreen real estate, and Fox’s effective purchase multiple falls below the S&P 500 average.

Scenario 3: The Integration Flywheel. The Upside the Market Isn’t Pricing

This is the kind of upside the market is not yet pricing, precisely because it lives out in 2028.

For Scenario 3, I keep the moderate ad growth from Scenario 2 and add a moderate acceleration on subscriptions. Subscriptions grew 30% year over year in Q1 2026. My baseline cut that to 12.3%, and using the same midpoint logic, I model a 20.6% subscription CAGR (’25–’28), lifting 2028 subscription revenue to $2.6B and total revenue to $7.5B.

I am comfortable modeling faster subscription growth for a specific reason, and it is not the obvious one. The bull case is not that millions of people are suddenly going to subscribe to Fox’s own services through Roku, though some will. It is that Roku becomes the aggregator of choice, the hub where consumers re-bundle their scattered streaming subscriptions onto a single bill, with a single interface, the way the old cable bundle used to work.

Management said plainly on the M&A call that the company still has a long list of monetization levers it has barely begun to pull, and the overhauled UI, paired with a deeper focus on content discovery across the ecosystem, is exactly what nudges a viewer to add and manage subscriptions through Roku rather than app-by-app. This is the re-bundling thesis I have hammered since Part 1, where I argued that Roku, alongside Amazon’s Prime Video Channels, is one of the very few players positioned to own that re-aggregation. Amazon has already proven how powerful it is to control the billing relationship and become the place people consolidate their streaming. Roku Pay is Roku’s version of that mechanism, and it is the lever underneath this scenario.

Standalone, this case throws off $1.42B in free cash flow, putting Fox at 13.7x EV/FCF and 15.0x P/FCF. Now layer in the $400M of management-guided run-rate cost synergies. Tax those at a full 25%, and $300M of clean post-tax cash drops to the bottom line. That brings pro-forma 2028 free cash flow to $1.72B, and the effective purchase multiple to 11.3x EV/FCF and 12.4x P/FCF.

When you underwrite the operating leverage of the platform alongside the post-tax deal synergies, my math indicates that Fox is acquiring some of the most important real estate in American television for roughly 11x my 2028 free cash flow forecast.

And to be clear about how I got here, every input in this scenario is a conservative midpoint between Roku’s decelerated baseline and the actual growth rate it posted last quarter. If Roku simply keeps doing a watered-down version of what it is already doing, this is the number Mr. Market is leaving on the table.

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The Valuation Ladder: Execution Is the Only Variable

Put the three cases side by side and I think the opportunity becomes obvious. Depending on how well management executes, we will look back and find the purchase price paid for Roku to be quite reasonable, and maybe even cheap.

A business throwing off growing, high-margin, recurring free cash flow, sitting on the most important distribution chokepoint in American television, is the kind of asset that comfortably earns a mid-teens multiple on forward cash flow in any rational market. In two of my three scenarios, Fox is buying it below that. In the third, it is paying right around fair value for what is close to a worst-case outcome. So the entire realistic range lands between roughly 11x and 15x 2028 FCF, and every one of those multiples already counts the cost synergies. Those are below-market prices for an above-average asset.

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Unlocking the Upside: The Levers Roku Has Yet to Pull

A model is only as good as the operating story underneath it, so let me close the loop on how Roku actually delivers the growth in Scenarios 2 and 3. This is the part the spreadsheet cannot show you. Since much of Part 1 and Part 2 covered the strategy of both companies, I’m going to be brief with some topics that I have touched upon before but need to be spelled out yet again.

The advertising engine. The 17.8% ad CAGR is not a hope, it is the natural consequence of two levers Roku is only now pulling. As I mentioned in Part 2 of my Roku series, for years, founder Anthony Wood resisted putting non-TV advertising on Roku’s landing page, an aesthetic discipline that quietly cost the company hundreds of millions in foregone revenue. That changed starting in 2023, and the recent UI overhaul turns the most valuable real estate in the living room, the screen every viewer sees before they choose what to watch, into a dynamic, monetizable feed without disrupting the experience.

The second lever is non-endemic demand. Traditional linear advertisers in auto, CPG, and travel have historically been slow to move budgets into programmatic CTV. Roku’s scale combined with Fox’s decades of linear ad-sales relationships is exactly the bridge that finally moves those sticky, billions-of-dollars budgets onto the platform.

The subscription engine. The 20.6% subscription CAGR runs on Roku Pay. When a viewer can subscribe to a new streaming service with a single click of the remote, with their billing already on file, conversion goes up and friction goes to zero. Roku becomes the billing relationship for the streaming wars, and owning the billing relationship means taking a steady, high-margin rev-share cut from whoever wins. That is the single most underrated position in media, and it is precisely the kind of recurring, high-margin, low-churn revenue that deserves a premium multiple.

The wild card: Tubi. Here is a lever I am deliberately not putting a number on, because Fox does not break out Tubi’s financials, but I refuse to let it go unmentioned.

Fox owns Tubi outright, and Tubi has quietly become one of the largest free, ad-supported streaming services in the country. I have been tracking its climb in Nielsen’s Gauge report for over a year now (see my monthly TV viewing snapshots), and it pulled that off without the Fox name attached.

On the M&A call, management was clear that it intends to keep Tubi and the Roku Channel as separate brands rather than merging them, and I think that is exactly the right call. The two are complementary, with only about a one-third audience overlap.

Tubi is over 90% video-on-demand, while the Roku Channel is over 80% FAST, the free linear-style channels you flip through. The viewer will likely never see a connection between them. But the synergy here is not on the screen, it is in the back office, and you only catch it if you think like an operator. Fox’s ad sales team can now walk into the upfronts and offer advertisers two complementary inventory pools under one roof, on-demand and FAST. That is a more complete pitch to a media buyer than either service makes alone, and it is the kind of go-to-market advantage that never shows up on a slide but absolutely shows up in ad dollars.

Conclusion: The Cheapest Way to Buy Roku’s Future

I am not naive about M&A. Given how much of it destroys value, healthy skepticism should be your default reaction when a legacy player makes a big technology acquisition, and I understand exactly why the market is wary of this one.

But I write Accrued Interest to show investors how to think like an operator, not just a trader. The whole point of this exercise is to demonstrate that once you underwrite the cash flow from the segment level, the deal is heavily de-risked: by 2028, Fox is paying somewhere between 11x and 15x real free cash flow for the entire asset.

And remember, every one of those multiples counts only the cost synergies, the $400M of redundant tech stacks, back-office overlap, and consolidated ad-sales teams. I have given Fox zero credit for revenue synergies, and the potential there is significant. Picture Fox’s ad sales team at the 2028 upfronts selling advertisers the Roku Channel and Tubi side by side, the FAST audience and the on-demand audience in a single conversation. Picture Fox’s first-party sports and news data flowing into Roku’s targeting engine. None of that is priced into Fox’s stock today. It is all free optionality.

So my conclusion is the same as it was in Parts 1 and 2, except now I have the model to back it up. Cord-cutting is not reversing, and the cable bundle is not coming back. At today’s price, buying Fox equity is the most asymmetric, value-driven way to own Roku’s future cash flow engine. I am reiterating my Outperform rating. You are welcome to argue with me in the comments, just bring a model.

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— Accrued Interest

Relevant Accrued Interest Articles:

2026.06.22: The Strait of Roku: How Fox Seized Streaming’s Chokepoint Without Firing a Shot

2026.06.16: Fox + Roku: A Brilliant Pivot from the Cable Bundle to the Living Room

2026.05.28: Monetizing the Habit: Meta’s Enterprise Land Grab and Roku’s Living-Room Billboard

2026.04.16: Roku’s 100 Million Milestone

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0. Introduction: The Chokepoint Hiding in Plain Sight

Over the weekend, Washington and Tehran sat down to begin talking through an end to the war, and for a few days the world stopped holding its breath over the Strait of Hormuz — the most-watched chokepoint on earth for months, for one simple reason: roughly 20% of the world’s oil passes through it. Iran sat on that leverage for years without fully using it. It took a war to finally weaponize the chokepoint.

I’ve had Hormuz on my mind all week, because it is the cleanest analogy I know for what Fox just did in the media industry — and for the story I want to tell in this piece.

The way I see it, Roku is basically the Strait of Hormuz of American streaming. Before you cancel me, hear me out. Roughly 44% of all connected-TV viewing hours in the United States pass through it — nearly three times its closest competitor. And much like its Middle Eastern counterpart, Roku spent years letting that traffic flow through while collecting a far smaller toll than it could have.

Earlier this week I published Part One of this deep dive “Fox + Roku: A Brilliant Pivot from the Cable Bundle to the Living Room”, where I walked through the merger deck and initiated coverage on NewCo with an Outperform rating. Last week I explained why Fox bought Roku. Today, in Part Two, I want to walk through the many levers Roku has only begun to pull — levers that can drive its revenue and profitability higher from here.

For the better part of a decade, Roku operated with one hand tied behind its back. It owned some of the most valuable real estate in connected TV and deliberately refused to monetize it. Not because it couldn’t. Because its founder didn’t want to. Understanding what changed is key to getting the stock right.

Much of the reporting that crystallized this for me comes from a sharp piece by Catherine Perloff in The Information last summer, “The Education of Roku’s Anthony Wood.”

Now let’s walk through the levers.

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1. Lever One: Roku Spent Years Refusing to Sell Ads to Entire Industries — and Left a Fortune on the Table

For years, Roku capped its own highest-margin revenue by refusing to let whole categories of advertisers — autos, insurance, retail, restaurants — buy its best inventory at all. That self-imposed ban is what I call the “aesthetic tax,” and it left substantial money on the table.

Up until 2023, CEO Anthony Wood prohibited non-TV and non-media products from advertising on the Roku home screen, all to keep the experience “clean.” In his words, the company had focused on “keeping it simple” to ensure “a great viewer experience,” but “we didn’t really focus on ‘how can we use it to drive our business?’ And so that’s what we’re doing now.”

According to former employees and ad executives quoted in The Information, Roku staffers pushed to open the home screen to a broader set of advertisers, and the advertisers were begging for it — and Wood overruled them, year after year. One agency executive, David Nyurenberg of InterMedia Advertising, said he was “always pushing them on the home screen unit,” because — as he put it — “everyone sees the home screen unit when they turn on the TV.”

Now, that advertiser demand didn’t vanish when Wood blocked it from the home screen; it just got shoved downstream onto the free, ad-supported Roku Channel — a structurally worse place to monetize. The home screen is owned outright, but the Roku Channel is a revenue share.

And it gets worse: more than half of the Roku Channel’s available ad slots went unsold in 2023. Wood only recently changed his mind, opening the Roku home screen to all sorts of advertisers — auto, retail, QSR, and more.

The 2024 10-K called it out plainly: Roku upgraded its marquee ads from static display to video to “diversify display ads on the Roku Home Screen beyond media and entertainment advertisers.”

By Q1 2026, ad spend from non-Media & Entertainment brands reached nearly 30% of total Roku Experience advertising revenue — an all-time high.

It’s only when you think like a business operator, not just a spreadsheet jockey, that you can appreciate how many levers Roku still has left to pull.

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2. Lever Two: The Old Home Screen Waved Traffic Through the Chokepoint for Free — the Redesign Installs the Toll Booth

This is where the Strait of Roku analogy does its most useful work.

For over a decade, Roku’s home screen was a static grid of app boxes. You turned on the TV, saw a dozen icons — Netflix, Prime Video, Disney+, Hulu, and so on. Some 100 million households streamed through the chokepoint every night, and Roku waved nearly all of them through for free. From a monetization standpoint it was the worst possible design: a static grid acts as an inventory cap, dedicating the most valuable top-of-funnel real estate in the living room to a fixed set of unchanging icons. The viewer sees the grid, picks an app, and disappears into someone else’s walled garden, with Roku capturing none of the economics.

Image of the old Roku homescreen, mostly static squares

Wood resisted changing this for years, too. Former employees describe pushing him to evolve the interface toward one that surfaced individual shows and movies — the way Amazon’s Fire TV did — and being rebuffed. The data was clear: program-forward interfaces demonstrably led viewers to spend more time watching the content they promoted. Once again, Roku was choosing its aesthetics over its monetization.

That changed on May 27, 2026, when Roku announced its first significant redesign of the home screen in over a decade. The new interface inverts the priority of the screen: instead of leading with a grid of apps, it leads with algorithmically generated, content-forward recommendations.

Image of the redesigned Roku homescreen, now with more personalized recommendations.

The company highlighted the changes in this YouTube video here.

Roku says its models now generate billions of possible home-screen combinations tailored to individual households. The redesign ships with AI-powered “Top Picks for You” rows, genre-based “Destinations,” a “Daily Scoop” trending row, a Roku City tile, and — critically — the Marquee Ad Video unit positioned so it’s visible the instant the screen loads, rather than buried a scroll to the right.

That last detail shows the toll booth going up. As Wood said on the Q1 call, “that change alone is driving more click-throughs.” Multiply that across 100 million households, and you can see why I’m so excited about this company’s potential.

The redesigned home screen turns the chokepoint into a tollgate, capturing brand ad dollars at the point of entry, before the viewer has opened a single app.

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3. Lever Three: Roku Quietly Built a Live Map of What Tens of Millions of Households Watch

Wall Street has spent years treating Roku as a software interface with an ad business attached. But I’d argue a big reason Fox wrote that $22 billion check is a remarkably valuable data asset — one of the largest privately held maps of American TV behavior in existence — built on Roku’s ability to effectively “see” everything a viewer watches.

Roku claims more than 100 million active streaming households, but that footprint isn’t uniform. Some reach Roku through a streaming stick plugged into an older TV. The rest come through a smart TV that runs Roku’s OS natively — a Roku-branded set, or one of the tens of millions of TCL, Hisense, and other models that have shipped with Roku’s OS built in since the licensing program launched in 2014.

Roku doesn’t break out how many users come in through a native TV OS versus a stick, so let me show how I ballparked it.

• Roughly 40 million smart TVs sell in the U.S. each year.

• Roku has held north of 30% of TV-OS share for years.

• Households replace their main set every 5 to 7 years.

• Almost all TVs sold in 2026 are smart TVs.

If you extrapolate those assumptions across a replacement cycle, I guesstimate there are about ~60 million native Roku TVs (OS-enabled) and 40 million “stick” households. (I know these figures aren’t exact, but they’re directionally right. Argue with me in the comments if you disagree.)

So why does the split matter? Because a smart-TV OS can see things a stick simply can’t. A streaming stick is a walled garden; it only knows what you do inside the Roku interface. A native OS controls the whole set — and it runs Automated Content Recognition, or ACR. ACR takes constant pixel- and audio-level fingerprints of whatever is on screen and matches them against a huge reference database, identifying what you’re watching the way Shazam identifies a song in a bar. And it works across every input on the TV — every plug in the back — so it can “see” the streaming apps, the cable box, the game console, and so on.

ACR isn’t perfect, but it solves a big linear blind spot — finding out what the viewer did after seeing a commercial that just aired. Roku sells it not as surveillance but as “measurement and attribution,” exactly what advertisers have been starving for as dollars leave linear.

Owning this layer across tens of millions of homes gives Roku data that pure-streaming apps can’t replicate, because they only see viewer behavior inside their own walls.

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If this capability sounds familiar, then it should — it’s the asset Walmart chased when it bought Vizio, the cleanest proof of this thesis. In late 2024, Walmart paid roughly $2.3 billion to take Vizio private. Walmart wasn’t doing the deal just to buy the hardware. It was buying Vizio’s SmartCast OS and its Inscape ACR data — the record of what Vizio homes watch — to pair with its own shopper data across roughly 150 million U.S. customers a week. That pairing produces advertising’s holy grail: closed-loop attribution, the ability to show a household an ad and then confirm it bought the product. It powers Walmart Connect, Walmart’s high-margin retail-media arm — and the whole move just ran the playbook Amazon wrote years earlier with Fire TV. If the data is the prize, then the TV hardware is simply the cost of admission.

Now compare the Walmart/Vizio deal to Fox/Roku. Walmart paid its $2.3 billion for Vizio’s roughly 18 million accounts; Fox is buying Roku’s 100 million-household footprint (which I’d guess has 60 million ACR-capable sets) and pairing it with live sports and news Walmart could only dream of putting next to the data.

What Fox really bought is a closed-loop attribution system on tens of millions of connected TVs, with a live feed of what those homes watch. For example, Fox can see, in aggregate, how much time Roku homes spend on ESPN or CNN through their cable boxes, then counter-program its own sports and news and nudge those viewers toward Tubi and Fox One.

For a company whose edge is live sports and news — genres that still air heavily on linear — owning the one tool that bridges linear viewing and streaming retargeting is an amazing strategic fit.

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4. Roku’s Own CEO Just Confirmed the Home Screen Is Nowhere Near Fully Monetized

This last point isn’t a new lever so much as confirmation of the first three. In the Q&A of the June 2026 M&A call, Roku revealed just how much toll-collecting capacity it still hasn’t switched on.

An analyst raised a reasonable-sounding question: if Fox starts using the Roku home screen to promote its own properties, won’t that cannibalize the home screen’s ad revenue? Every pixel given to a Fox promo is, in theory, a pixel you could have sold to a third party.

Anthony Wood jumped in to correct the premise:

“I just wanted to talk a little bit about — you said a comment, which I think I just want to correct, which is that you implied that promoting FOX owned and operated properties on the Roku home screen would somehow reduce profitability for the home screen. I don’t think that’s true. Actually, it’s going to increase profitability… So one of the — so we sell ads on our home screen throughout our UI, obviously. But we also have many, many ways to promote content throughout the UIs that are not necessarily sold… and we can do it in a way that’s going to increase the amount of revenue that’s generated by the Home Screen.”

What Anthony is really saying is that the commercial ad slots Roku sells are only one layer of the home screen’s promotional surface. Underneath sits a vast amount of organic, algorithmic real estate that Roku doesn’t sell to anyone — the “Top Picks for You” rows, the genre Destinations, the menu placements, the Daily Scoop. Because it owns the operating system, Roku can route enormous viewership through all of it without touching a paid ad slot, driving demand wherever it wants — a Fox property, a partner’s show, a Roku Channel original — on inventory that has no opportunity cost, because it was never for sale.

The Roku UI is so far from fully monetized that promoting Fox’s content doesn’t compete with the paid inventory — it runs in parallel, on surface area Roku hasn’t even tried to price.

Wood was just as direct on why he’s selling now. He framed it as negotiating from a position of strength — Roku sitting “at the center of the streaming ecosystem” with the levers finally working — at what he flatly called “a great price,” into a buyer who understands what the asset is worth. This is a business that has just proven its model and wants a bigger balance sheet behind it to press the advantage.

Which brings us to the numbers from the most recent quarter.

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5. The Payoff Is Only Just Starting to Show Up in the Numbers — Which Is Exactly Why Roku Sold Now

Now, here’s what changed. For years Roku reported revenue in a single opaque “Platform” line. In Q1 2026, it finally split Platform into two reported segments — Advertising and Subscriptions. That added disclosure was deliberate. You don’t pry open the hood and show investors more KPIs when the business is sputtering; you do it when things are improving and you want investors extrapolating that improvement into the future.

And the margins explain why: Advertising ran a 60.5% gross margin, Subscriptions 41.1%, the blend 51.6%. As the higher-margin advertising line grows faster than subscriptions, the mix alone pulls the blended margin up over time.

The recent revenue acceleration is the cleanest evidence that the levers are working. Full-year 2025 Platform revenue grew a steady 18% YoY. In Q1 2026, the first quarter in which the new advertisers, the video marquee units, and the run-up to the UI redesign were all scaling at once, it jumped to 28%.

Advertising grew 27% YoY to $613 million; Subscriptions grew 30% to $519 million on Roku’s best-ever quarter for Premium Subscription sign-ups. The supporting metrics all moved in tandem — programmatic ad spend up more than 40%, Ads Manager advertisers more than doubled, Marquee Ad Video advertisers doubled while spend on it tripled. And it dropped through to the bottom line, with Adjusted EBITDA hitting $148 million, up 165% YoY off a $56 million base.

The Q1 Inflection Point (YoY)

None of these are mature numbers. The non-M&E mix shift, the new UI, the ACR-driven targeting — all of it is early, the first innings of the monetization payoff. Roku didn’t sell a finished story but an inflecting one. You command a far better price demonstrating an upward earnings trajectory than delivering a plateau.

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Conclusion: Iran Needed a War; Fox Just Needed Patience

Step back to Part One. The Murdochs sold the bulk of their entertainment empire to Disney in 2019, very near the top of the peak-TV bubble. They sold high. Seven years later, they’ve put that capital down on the front door of the living room — just as connected-TV races past 40% of the TV pie. The call from Part One stands: Outperform. Mr. Market mispriced Roku because its financials describe the company Roku used to be, not the one it’s becoming.

It took Iran a war to weaponize its strait. Fox needed no war — no bidding war, no bet-the-company rights auction. Just a patient, perfectly-timed deal it had been setting up since the day it walked away from cable.

Could Roku have kept building the toll booth alone? Sure — Q1 proved the model works. But advertising and data are scale games, and a Fox balance sheet lets Roku press that advantage harder and faster than it ever could solo. The cable bundle is not coming back. The future of television runs through a chokepoint — and Fox just bought the one that finally learned to charge for passage.

Next time, I’ll lay out some ideas on how else Fox can use Roku to wring more value out of its O&O properties. As always, let me know your thoughts in the comments.

Relevant tickers: , , , , , ,

— Accrued Interest

Relevant Accrued Interest Articles:

2026.06.16: Fox + Roku: A Brilliant Pivot from the Cable Bundle to the Living Room

2026.05.28: Monetizing the Habit: Meta’s Enterprise Land Grab and Roku’s Living-Room Billboard

2026.04.16: Roku’s 100 Million Milestone

2026.03.20: Dead on Arrival: 8 Reasons the Paramount-WBD Merger Will Fail

2026.03.12: The Pokémon Theory of Media Investing

2025.12.18: Why Disney Stock Will Underperform in 2026

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 for free to read the rest of this Accrued Interest deep dive on FOX/ROKU.

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Introduction: The Best Strategic Move in Legacy Media in Years

Yesterday morning, Roku announced it had entered into a definitive agreement to be acquired by Fox Corporation. I said in my May 28th update (Monetizing the Habit: Meta’s Enterprise Land Grab and Roku’s Living-Room Billboard) that I wanted to expand my coverage of Roku going forward. Waking up Monday to this M&A news was a pleasant surprise, to say the least.

There is a lot to be said about the new Fox + Roku. I wanted to give all of my subscribers one of my deep dives where I walk through the entire investor relations merger deck and translate what the executives are really trying to say. In my prior corporate life, I have a lot of experience building these investor decks from start to finish — drafting them, editing them, and working hand in hand with senior executives at multi-billion-dollar media companies to get the story right. So in today’s piece, we are going to do a page-by-page teardown and give you the full picture: what management said, what they actually meant, and what this means for both companies.

I am going to do the opposite of burying the lede. I think this combination is a brilliant strategic move for Fox.

In my prior coverage, I have repeatedly highlighted that investors have underestimated just how savvy the executives at Fox Corporation have been at navigating the switch from linear to streaming over the last 10 years. Throughout my extensive coverage of the Paramount-Skydance and Warner Bros. Discovery storylines — including “Dead on Arrival: 8 Reasons the Paramount-WBD Merger Will Fail“ — I have explained many times why I considered Fox to be the smartest of the legacy media providers. The decision in 2019 to sell the majority of their entertainment cable channels and the bulk of 21st Century Fox to Disney — cashing out at very close to the top of the peak-TV bubble — is, with the benefit of hindsight, one of the great pieces of strategic timing of the past two decades. Disney has been carrying that hangover ever since. (For more on that, see my December piece, “Why Disney Stock Will Underperform in 2026.”)

Fast forward to 2026, and Fox is now flipping the script. By acquiring Roku, the company is moving from being a content supplier negotiating with local cable companies like Comcast and Charter, to being one of the largest and most powerful distributors of digital video services in the United States. Instead of fighting over carriage and channel placement on someone else’s plumbing, Fox will now have a direct seat at the table — and a say — in how every other major streaming service is consumed by the tens of millions of Americans who use Roku as the home screen for their entertainment.

In short: this deal allows Fox to finally break free of the cable bundle once and for all. They will be able to go over-the-top — a phrase you don’t hear as often anymore — more than they ever have before.

For new subscribers, in the past I have had strong demand from readers for these detailed breakdowns of investor merger decks. For reference, you can find my prior teardowns of the Starz, Versant Media, Nexstar, and Warner Bros. Discovery decks in the Accrued Interest archives. Without further ado, let’s get into the Fox + Roku deck that management walked through during yesterday morning’s conference call.

One small editor’s note before we begin: I am going to start with the strategy and operations slides, and save the transaction overview from Slide 3 and the sources & uses from Slide 14 for the end — it makes more sense to discuss the financial mechanics together, after we have established why this deal makes sense strategically.

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Slide 5: Fox + Roku Combines #1 Sports and News With the #1 CTV Platform — and Quietly Frees Fox From the Cable Bundle

Slide 5 is, in my opinion, the single best page in the deck for understanding what is actually being assembled here. The left side lays out what Fox brings to the table — sports, news, and the Tubi free streaming service. The right side lays out what Roku brings — a scaled, advanced CTV platform with massive reach and the monetization engines underneath it.

Fox is leaning, understandably, on its expertise in live sports and news. The news side of that story is the strongest piece. As I have argued before, Fox News is the undisputed leader in cable news, dominating the category with somewhere around a 60% share by some estimates. I laid this out in detail in my deep dive on Fox last summer: “I consider Fox News to be the most valuable network in the U.S., as it has the audience size and profitability comparable to a Big 4 broadcast network (ABC, CBS, NBC). It is a must-buy for advertisers.” That has not changed.

But there is one critical fact about Fox that the slide does not spell out — and which I want my readers to keep in mind, because it is fundamental to why this deal works. Fox owns its O&O (owned-and-operated) stations in the biggest U.S. television markets. By my estimate, through Fox’s O&O footprint, the company can connect nearly 40% of U.S. households directly, without going through a third-party affiliate group like Nexstar or Sinclair. As cord-cutting continues to accelerate, that O&O footprint becomes more valuable, not less. Why? Because Fox will eventually be able to push local-market broadcast signals from its O&O stations directly onto Roku — to homes that no longer have cable. That is a quiet, structural advantage that I do not think the sell-side is giving Fox enough credit for. It is one more way this deal lets Fox break out of the cable bundle for good.

The right side of the slide gets at the heart of why Fox is paying $22 billion. Roku gives Fox a seat at the table — and a meaningful amount of control over, as the slide puts it perfectly, “a streaming ecosystem with massive reach.” And I take that line at face value, because Roku genuinely is the front door to streaming entertainment for a huge chunk of American TV viewers. Whether you watch Netflix, Disney+, Max, Paramount+, or Apple TV+ — there is a very high probability that you start that journey by turning on a Roku-powered television.

Roku is also not exaggerating when the slide says it has “leading advertising and subscription monetization engines.” Roku serves as both gatekeeper and toll collector. Along with Amazon Prime Video channels, it is one of the top ways Americans have been re-bundling their digital subscription services — a theme I have been hammering for over a year now. Roku has stickiness because it offers a simple convenience that the cable companies used to offer: putting all of your streaming services onto a single bill, with a single password and a single interface. That is, frankly, an underrated business.

Ten years ago, if you were a basic cable network, reaching ~100 million households was the gold standard. Today in 2026, with somewhere around 60 million households still subscribing to traditional pay TV, Roku can reasonably claim to help you get to functional full distribution in the United States. That is the asset Fox just bought.

Before we get to numbers and financials, I want to underline what should already be obvious from this slide alone. Strategically, this is an incredibly smart and forward-thinking deal for Fox. This is exactly the type of move you need to make if you want to leapfrog yourself from a legacy programmer into a major streaming player.

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Slide 7: Roku Isn’t Just the #1 CTV Operating System — At 44% Share, It Is Roughly 3x Its Nearest Competitor

Slide 7 drives home just how dominant Roku is as the gateway to television viewing in America. The headline numbers — #1 CTV platform, 100M+ global streaming households, 100% authenticated first-party data — are not marketing fluff. They are real.

A few details I want to flag for readers, because they matter for how Fox will be able to integrate this asset:

First, the 100 million streaming households number is heavily skewed toward North America. That geographic concentration is a feature for Fox, not a flaw. Roku does not have a meaningful presence in Europe, Asia, or Latin America. Roku sticks and Roku TVs are predominantly sold in the United States, Canada, and Mexico while its newer expansions into Europe (UK) and Latin America (such as Brazil) remain in the early stages of building scale.

Fox-branded networks are also primarily U.S.-focused entities. Fox is not paying up here for international subscribers that would dilute the bottom line. The fit is clean: a U.S.-focused content portfolio acquiring a U.S.-focused distribution platform, in the most profitable media market in the world. That alignment alone is worth real money in synergy terms.

Second, the bar chart on the right side of the slide is the single most important visual in the entire deck. It shows the percentage of total U.S. hours spent viewing CTV content by operating system brand, as of Q4 2025. The numbers are: Roku at 44%, Amazon Fire TV at 14%, Samsung at 12%, Google’s Android TV at 5%, and all others (Apple TV, Xumo, Vizio, etc.) combined at 25%.

Read that again. Roku’s share of U.S. CTV viewing hours is roughly three times its closest competitor. And critically, Roku has built that dominance against trillion-dollar competitors (Amazon, Google) who have effectively unlimited capital and have been trying to take the living room for over a decade.

This stat is the entire reason this deal exists. The moment the merger closes, Fox vaults itself into first place in the most important real-estate category in American television. As more media companies push more content into streaming, Fox will now have a meaningful say in how the market evolves. That is a structural advantage that money, frankly, cannot easily replicate.

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Slide 8: Ignore the Streaming Sticks — The Real Roku Business Is a $4.4B High-Margin Platform Engine

Slide 8 is a great overview for readers who are not deeply familiar with how Roku actually makes money. In my May 28th update, “Monetizing the Habit: Meta’s Enterprise Land Grab and Roku’s Living-Room Billboard,” I explained why I was dropping coverage of FuboTV (the sub-scale aggregator trap) and reallocating that bandwidth toward Roku — the structurally superior, pure-play “front door” to the living room. I never got the chance to publish a full initiating coverage piece on Roku. Slide 8 will do the job nicely.

Let me say this up front because it is counterintuitive: Roku does not make money on streaming sticks. The vast majority of the profitability comes from its Platform segment — advertising and subscriptions. Here is how to think about it. All numbers below are on an LTM basis as of Q1 2026.

Total LTM revenue: $4.965 billion, up +18.7% year-over-year. Substantially all of that revenue is generated in North America. This is not an international play. It is squarely about the United States — which, as I keep reminding readers, is by far the most profitable media market in the world.

For the purposes of this article, I am going to set the Devices segment aside. That is where Roku books the revenue from those ubiquitous streaming sticks. Devices are only about 11% of total revenue, and it is even less than that as a share of profit — because it is a consistent loss leader. In Q1 2026, Devices brought in $117.6M but sustained a gross loss of $19.1M, a negative 16.3% gross margin. For full-year 2025, the Devices segment ran at roughly a negative 14% gross margin.

And that loss is entirely by design. Roku is intentionally subsidizing hardware to drive maximum user acquisition into the Platform ecosystem. And here is the part CEO Anthony Wood made clear on yesterday’s call that I want to highlight, because it is not in most analyst notes: Roku has a compounding engineering advantage that makes that loss-leader strategy sustainable. Roku is the only major CTV platform with an operating system built from the ground up specifically for streaming — not a ported version of HTML, not a repurposed mobile OS. As a result, Roku’s OS uses significantly less memory than competitors. In a market where memory prices are spiking — which they are — that translates directly into a manufacturing cost advantage that compounds. Every TV OEM in the world that wants to ship a cheap, profitable connected TV has a structural reason to choose Roku’s OS over Android TV or Fire TV.

Now to the part that actually matters. The Platform segment is roughly $4.4B of LTM revenue, splitting out as:

• Advertising: ~$2.5B (49% of total revenue), +19.2% YoY

• Subscription: ~$1.9B (39% of total revenue), +26.8% YoY

Roku’s LTM Platform gross margin is approximately 44%. LTM Adjusted EBITDA was $512.9M, up +201% YoY — and Q1 2026 alone delivered $148.4M of Adjusted EBITDA, up +165% YoY. That is operating leverage finally kicking into gear.

This is the part of the business that matters. What Fox is buying with this deal is an advertising-and-subscription monetization engine, with a 100M+ household funnel feeding into it, that just hit the inflection point on EBITDA.

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Slide 9: The Combined TAM Is Roughly $145 Billion — Fox Isn’t Buying a Company, It Is Buying a Lane

Slide 9 lays out the total addressable market for Roku’s two core verticals: Connected TV Advertising and Subscriptions. Management did a good job here, and I want to put real pen to paper on the numbers because, when investors think about media TAMs, they tend to gloss over them.

CTV advertising is currently a ~$60 billion market, projected to grow at roughly a 12% CAGR through 2030. You can quibble with the precise forecast, but the directional trend is undeniable: marketers are aggressively shifting linear TV dollars off of old-school broadcast and cable, and into the digital/CTV bucket. CTV is the very first place those budgets go.

Subscriptions is an even bigger bucket, at roughly $85 billion, projected to grow at a slower but still healthy ~8% CAGR. You can quibble with that estimate too, but the thing I know with high confidence about subscriptions is that they are higher-margin than advertising, stickier than advertising, and importantly, recurring — most customers are billed monthly, and inertia is real.

As much as American consumers complained about the cable bundle, what was undeniable was that aggregating a lot of little subscriptions into one bill worked — it reduced churn, simplified the consumer experience, and protected pricing power. Re-bundling of streaming services is the single most important consumer trend in media in 2026, and Roku is one of the two or three companies most directly positioned to benefit from it (Amazon Prime Video Channels is the other obvious one).

One concern I want to address head-on. Some readers will ask: now that Roku is owned by Fox, won’t competitors like Disney, Netflix, and Warner Bros. Discovery pull back from the Roku platform? My answer is no. Despite the intense content competition, I do not expect any of the major streaming providers to pull back on their relationship with Roku just because Fox is now its corporate parent. Why? Because consumers vote with their wallets every day, and they have already voted for Roku as their home screen. Netflix, Disney+, and Max cannot afford to walk away from Roku’s funnel any more than Roku can afford to alienate them. That mutual dependence — what management correctly called the “Switzerland” model on the call — is durable. Lachlan Murdoch was unequivocal yesterday that Roku will remain an “open, partner-friendly platform.” I believe him, and not because I am taking him on faith — I believe him because the economic incentive on both sides points in the same direction. Roku is too valuable to its partners as a neutral distributor for Fox to compromise it. Fox will make far more money keeping it open than trying to play favorites.

There is one more reason here that I want to flag, because it goes back to the 2019 Disney deal I mentioned earlier. When Fox sold the majority of 21st Century Fox to Disney, they also sold the majority of their TV and film production studios with it. That means Fox today is not a meaningful original-content creator. They are primarily a sports, news, and broadcast distribution business — plus Tubi as a FAST aggregator. The Fox + Roku combined entity will always need third-party content from Netflix, Disney, Warner Bros. Discovery, Paramount, Amazon, and the rest to fill out its app catalog and keep viewers engaged. This structural reality reinforces neutrality. Fox has every incentive to be an honest broker.

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Slide 10: Combine Fox With the Roku Channel and Fox Just Leapfrogged Disney in Total TV Viewership

For long-time readers of Accrued Interest, you already know that for over a year now I have been consistently reporting on the monthly market-share changes in TV viewership using Nielsen’s Gauge report. (See my monthly snapshots, including the most recent one, “Media Stock Insights from Nielsen’s Jan-26 TV Snapshot.”) The thesis has been consistent: every single month, YouTube, Netflix, and the FAST/CTV platforms take share from linear broadcast and cable, and that trend is structural, not cyclical.

Slide 10 visualizes that point as of March 2026. Some of the headline numbers from that chart:

• YouTube: ~13.2% of total TV viewing

• Disney (including linear ABC, ESPN, etc., plus Disney+): ~10.5%

• Fox (broadcast + cable + Tubi): ~7.2%

• The Roku Channel: ~3.0%

You can argue with the precise percentages — every Nielsen methodology change moves them around — but the trend is the only thing that matters.

Here is the bit I want every reader to pause on: combine Fox (7.2%) with the Roku Channel (3.0%) and the pro forma share is ~10.2%, almost exactly equal to all of Disney.

I want to dwell on that for a moment, because the symbolism matters. Back in 2019, Fox sold the majority of its entertainment cable channels and the bulk of 21st Century Fox to Disney — a deal that, at the time, Wall Street treated as a coup for Iger and a defeat for the Murdochs. Five years later, the consensus on that deal has flipped completely. As I wrote in “Why Disney Stock Will Underperform in 2026”: “The acquisition of Fox is widely regarded as a disappointment, if not a complete failure. It is noteworthy that what was once Disney’s largest acquisition is no longer considered the strongest aspect of its investment strategy, merely five years later.” Disney has spent six years digesting that deal and trying to grow into the multiple they paid for it. They have not.

Fox, meanwhile, took the cash, kept the most defensive parts of their portfolio (Fox News, Fox Sports, the O&O broadcast stations, Tubi), waited patiently, and is now using the balance sheet to leapfrog Disney in total share of TV viewing. Embedded in that 7.2% Fox number is Tubi — a FAST service whose impact I have been highlighting in my monthly TV viewing updates for over a year — which has been quietly building share while no one was watching.

The most important point on this slide is not the precise number. It is that Fox is coming away from this deal with massive scale in TV viewership — and massive scale is exactly what advertisers want to see when they allocate budgets at the upfronts.

Cord-cutting is not going away. It is still accelerating. But I can say with confidence that Fox has not only secured itself a life raft — they have bought themselves a battleship, and they are now a commanding presence in the streaming-distribution waters.

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Slide 12: The 70/30 Pro Forma Revenue Mix Is the Cleanest Picture of Fox’s Strategic Pivot

Slide 12 makes the strategic pivot explicit. The pro forma revenue mix on an LTM basis is going to be approximately 70% Fox (ex-Tubi) and 30% Roku + Tubi. The total combined revenue base is approximately $21B.

I want to flag something that I think management got exactly right on this chart: they combined Tubi and Roku into a single 30% wedge. That is the correct way to think about it. Over the last several years, Tubi has been growing market share and revenue at a rapid clip, and Fox leadership has been telling the Street that Tubi is on a credible path to sustained EBITDA profitability as it scales. Combining Tubi with Roku — particularly the Roku Channel, which is its closest analog — creates a multi-brand FAST ecosystem that triples combined reach while maintaining two distinct audience pools. (As Lachlan noted on the call, Tubi and the Roku Channel have only about a one-third audience overlap, despite both being free, ad-supported services. They are genuinely complementary.)

I am incredibly excited about the possibilities for Tubi combined with the distribution power of the Roku platform and the Roku Channel. The deck claims this deal will “accelerate adjusted EBITDA and free cash flow growth.” That is the math, plain and simple.

Before we get to valuation — and I want to be clear that I am going to come back to valuation in a follow-up piece — I will say without hesitation: the combined Fox + Roku is a meaningfully stronger, healthier enterprise than either company was independently.

In my piece “The Pokémon Theory of Media Investing,” I argued that in order to beat the market in TMT stocks, you need to focus less on spreadsheet math and think harder about what really moves the needle strategically. This deal is a Pokémon-theory deal in the purest sense. Fox is evolving. Roku is evolving. The combined entity is in a different competitive category than either parent.

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Slide 14: The Market Sold Fox Down 23%, and I Fundamentally Disagree

Let me now turn to the financial mechanics of the deal, which the deck lays out on Slide 14 (Transaction Sources and Uses). And let me start by acknowledging something that I would be remiss to ignore: the market has, as it often does, punished the acquirer. As of the time I am writing this, Fox stock is at about $52 per share — down roughly 23% over the last five days from approximately $68 on June 11th. That is a brutal initial reaction.

Here are the deal terms, in plain English:

• Purchase price: $160 per Roku share, implying an equity value of ~$25B and an enterprise value of ~$22B.

• Consideration mix: 60% cash ($96/share) and 40% stock (0.9693 FOXA shares per Roku share). The stock portion is anchored to a $66.03 10-day VWAP for FOXA Class A shares as of June 10th.

• Pro forma ownership: Fox shareholders own ~73% of the combined company; Roku shareholders own ~27%.

• Financing: Approximately $8B in new debt, supported by a $12B bridge commitment, plus approximately $7B of pro forma combined balance-sheet cash.

• Leverage: Net leverage at close is projected at 2.8x pro forma LTM EBITDA (incorporating a 50% credit for synergies).

• Synergies: $400M of expected run-rate cost synergies.

• Accretion: Expected to be free cash flow per share accretive within two years of closing, which is targeted for the first half of calendar 2027.

I want to come back in a future piece with a full valuation of the combined entity, because the work to do there is substantial and deserves its own deep dive. But I will say this much in the meantime: I fundamentally disagree with the market selling Fox down -23% in 5 days.

Why? A few reasons. First, the 40% equity component of the deal does mean meaningful share issuance — approximately 152 million FOXA Class A shares — and that always weighs on the acquirer’s stock initially. That is a mechanical, technical sell-off, not a strategic one. Second, some of the concerns I have seen from the sell-side relate to Roku’s low-margin hardware business introducing operational complexity to Fox. I addressed that on Slide 8 — the hardware business is a deliberate loss leader supported by a genuine engineering edge, and the Platform business is what’s actually accretive. Third, the deal preserves investment-grade balance-sheet status, with leverage at a manageable 2.8x, and Fox has explicitly committed to continuing its capital return program (buybacks and dividends).

When I run my mental sanity check, what I see is a balance sheet that can absorb this, a synergy target that is reasonable rather than aspirational, and a strategic re-positioning that fundamentally changes Fox’s long-term growth profile. The market is pricing the dilution. The market is not yet pricing the optionality. That is the spread, and that is where I think there is real opportunity in Fox stock at $52. More to come in a dedicated valuation piece.

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Q&A: Three Themes From the Conference Call That Investors Should Pay Attention To

The Q&A portion of yesterday’s M&A call clarified several investor concerns. I want to highlight three themes I thought were particularly important:

1. The Real Driver of the Deal Is the CTV Ad Migration. Management noted on the call that CTV’s share of total TV ad spend has grown from 25% to 41% in recent years, tracking closely with streaming capturing approximately 50% of total U.S. domestic TV viewing. That migration is permanent, not cyclical. Fox is acquiring the infrastructure — Roku’s home screen, Roku Ads Manager, the Roku Exchange, the authenticated first-party data — to capture those ad dollars as they continue to migrate. This is the single most important durable trend in television, and Fox has just bought the dominant pick-and-shovel exposure to it.

2. The “Switzerland” Model is Sacred — Fox Will Not Throttle Third-Party Apps. Multiple analysts probed whether Fox’s ownership would compromise Roku’s neutrality. Both Lachlan Murdoch and Anthony Wood emphasized — unequivocally — that Roku will remain an “open, partner-friendly platform.” Lachlan was specific: Roku already partners with YouTube TV, with Comcast, and with every major streamer. “That doesn’t change.” The strategy here is to use Roku’s rich first-party data and targeting capabilities to increase the monetization of all premium content across the board — including, but explicitly not at the expense of, third-party apps like Netflix or Disney+. As I noted earlier, the economic incentive on both sides points in the same direction. I take management at their word here.

3. Scale Is About Footprint, Not Sports-Rights Bidding Wars. Several analysts asked whether Fox would use Roku’s scale to wage a more aggressive bidding war for live sports rights against Big Tech. The answer was a clear no. Fox is not planning to outbid Amazon, YouTube, or Netflix for the next NFL package or NBA package. Scale here is defined by footprint, not by content acquisition. The deal makes Fox the third-largest player in U.S. TV viewing — and that funnel will be used primarily to cross-promote Fox’s high-margin digital assets like Fox One, Fox Nation, and Tubi, not to chase ever-more-expensive sports rights. I think this is exactly the right discipline. The mistake the rest of legacy media has been making for five years is paying up for sports as an existential moat. Fox is doing the opposite — using its existing sports franchises as a moat, and putting the new capital into distribution.

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Conclusion: Fox Has Bought Its Battleship — Outperform

Yesterday’s announcement is, in my view, a transformational moment for Fox. By acquiring the #1 CTV operating system in the United States, Fox is making a clean, decisive pivot away from the eroding linear cable bundle toward the future of streaming distribution. The deal solves the distribution dilemma for Tubi, gives Fox a commanding position in CTV advertising, and brings 100% authenticated first-party data on more than 100 million streaming households inside the tent.

Could Roku have continued to thrive as a standalone company? Absolutely — Q1 2026 results showed Platform revenue accelerating to a 28% YoY growth rate and Adjusted EBITDA up 165% YoY. But scale matters in advertising, and partnering with Fox lets Roku move faster and smarter than it could on its own.

For Fox shareholders, this is what good capital allocation looks like in legacy media. The Murdochs cashed out of linear cable at the top of the bubble in 2019. They are deploying that capital into a digital distribution platform at the moment CTV is taking 41% of TV ad spend and rising. They have sold high and they are buying right. That is execution.

I am initiating coverage on the pro forma Fox + Roku entity with an Outperform rating. I disagree with the market’s 23% sell-off in Fox stock on the announcement, and I think the current price of approximately $52 per share represents a meaningful long-term opportunity for patient investors. A dedicated valuation deep dive will follow in the coming weeks.

For now, my bottom line is simple. Cord-cutting is here to stay. The cable bundle is not coming back. The future of television is the home screen — and Fox just bought it.

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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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0. Introduction

If you have read Accrued Interest for any length of time, you know I am always hunting for cracks in the legacy media bundle. The TMT landscape in 2026 is no longer a debate about whether linear television is in secular decline. The only live questions now are how fast the cash cow melts, who captures the high-intent viewer it sheds (spoiler: YouTube and Netflix), and what a management team is supposed to do with the river of free cash flow on the way down. That last question is where the value-investing crowd keeps stepping on the same rake — and it is exactly where I part ways with one of the most respected investors in the business.

If this stock deep dive seems longer than my usual write-ups, that’s because this one is personal. Back in 2013, while I was getting my MBA at Columbia Business School, I won the Ira Sohn Investment Idea Contest with a blind submission pitching Tribune Broadcasting. (For the details on my first 15 seconds of fame, check out my recap, How My Stock Pitch Won the Ira Sohn Investment Idea Contest.)

One of the judges who put me on that Lincoln Center stage was David Einhorn. More than a decade later, here I am taking apart Einhorn’s own Sohn pitch. It feels a little like the student grading the teacher’s homework — and I don’t say that lightly, because Einhorn is a genuinely great investor. But on Versant, I think he is wrong.

At the Ira Sohn Investment Conference on May 12, 2026, Einhorn pitched Versant Media Group ($VSNT) as a “sexy,” deeply mispriced cash machine at $41 a share. I flagged Greenlight’s new position back in my April 14 update, when the 13F first surfaced but before I had the full thesis in hand. Now that he has laid the entire spreadsheet out on a stage, I can give it the deep dive it deserves. (Go to minute 11:00 to jump to the Versant section of the presentation.)

With respect to a great investor: I think this is a value trap, and the bull math only works because it quietly assumes the one thing that cannot happen — a smooth, orderly decline of the cable bundle. Versant remains an Underperform in my book, and I want to walk you through precisely why.

Per Greenlight’s Q1 2026 13F, Einhorn established a brand-new stake of roughly 3.0 million shares — about 2.1% of the shares outstanding, or close to 2.6% of the active public float once you strip out the index whales (Vanguard owns about 10%, BlackRock about 8%) and Brian Roberts’ super-voting Class B block. For Greenlight, that is a meaningful, “medium-sized” position. But it sits well below the 5% threshold that would let him file a 13D and start swinging a board-level cudgel. In other words, this is a non-activist stake. Einhorn cannot force management to run the private-equity dismantle playbook that — as I’ll argue — is the only thing that would actually unlock value in this company. On this trade, he is a passenger on the same structural cliff as every other minority holder.

1. Einhorn’s Bull Case Is a Beautiful Model Built on Flat Lines

Let me give the bull case its full, fair hearing, because the way Einhorn framed it on stage, it is genuinely seductive. Every figure that follows is from his May 12 presentation, per his own estimates, assuming a stock price of about $41 per share.

His pitch rests on the classic deep-value pillars. As of that presentation, the stock fetched roughly 4.6x earnings and 4.2x EBITDA, threw off a ~19% free-cash-flow yield, and management was buying back about $100 million of stock a quarter. He put his projections on the screen all the way out to 2029, with total revenue declining at an average of only about -4% a year in aggregate, and Adjusted EBITDA fading from roughly $2.18 billion in 2025 to about $1.31 billion by 2029.

Here is the part that mattered to me. I took Einhorn’s numbers and reverse-engineered the model to see what was actually driving that gentle -4% blended glide. Two assumptions do all the work.

First, he models the legacy Pay TV business declining at a consistent -7% every single year through 2029 (roughly $5.4 billion in 2025 grinding down to about $4.0 billion in 2029). Second, he models the non-Pay TV bucket — a hodgepodge of underweight, mismatched businesses — growing at a tidy +6% a year, every year, through 2029. Blend a -7% melting core with a +6% growing tail and you arrive at his -4% aggregate. The headline he draws from it is striking — he argues that Versant can generate about 62% of its entire current market cap in cumulative levered free cash flow by the end of 2029, leaving a business with only about one turn (1x) of net leverage.

He even tipped his cap to the melting-ice-cube bears with a clever one-liner. Einhorn conceded that Versant is “somewhat of a melting ice cube. The market these days thinks melting ice cubes are nearly worthless. Actually, they turn into a fair amount of fresh water.”

His point was that with more than 60% of programming tied to live news and events, the portfolio is supposedly far more resilient to cord-cutting than your average bag of entertainment cable channels — so you should be happy to stand under the spigot and collect the meltwater.

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2. Value Traps Rarely Decline in a Straight Line

Here is my problem. The bull thesis rides on two straight-line assumptions from now until 2029, both of which seem highly unlikely. Einhorn assumes a constant -7% YoY decline in the Pay TV business and a constant +6% growth rate on everything else. That is what I call the Smooth Pace Fallacy: treating structural decay (and structural growth) like tidy depreciation schedules on a piece of factory equipment. Neither segment is going to behave the way you think it will.

Let’s take the -7% Pay TV assumption first. Cable does not melt in a straight line; it melts on a curve. As the most valuable, most affluent subscribers cut the cord first, the networks lose pricing leverage over everyone who stays, which accelerates the next leg down. And Einhorn’s “gentle” baseline already looks too generous. Versant management’s own full-year guidance math implies a -7.2% legacy decline at the midpoint.

And the most recent print on the carriage line is already past that mark. Linear Distribution — the affiliate fees operators pay to carry Versant’s channels, and the cleanest read on the core Pay TV business — fell -7.3% in Q1, even though carriage contracts typically carry annual rate increases. (I’d leave Advertising out of this comparison; that line is lumpy, swinging with the election and sports calendar, so I anchor on carriage revenue instead.) Einhorn is starting his soft glide from a pace the business has already breached — then extrapolating it, unchanged, for four more years.

Now for the non-Pay TV growth assumption of +6%. I want to remind readers that this segment is not some normal, digital-based business. This bucket contains a number of mismatched, uncorrelated assets. A constant +6% every year assumes that a grab-bag of underweight businesses, several of them levered to theatrical attendance, all march higher in lockstep. I don’t buy the smoothness on either end.

3. Why I Modeled Versant More Conservatively in January

Now let’s contrast that with how I modeled Versant back in January, in Is Versant (VSNT) Cheap or Just Cheaply Valued? The Case for $27. Pictured below were my estimates at the time.

To stay deliberately conservative, I ran total revenue declining at -7% — the high end of management’s own guided decline — in every year out to 2028. I wasn’t trying to nail the decimal; as the old line goes, I would rather be approximately right than precisely wrong. My reasoning was simple, and it still holds: management teams in this industry skew optimistic, so I think it is more likely than not that Pay TV bleeds faster than the guide, and that the non-Pay TV pieces grow slower than advertised — or, at the very least, that hitting those growth numbers will require M&A, which is itself an admission that the organic growth story isn’t really there.

Put plainly: Einhorn is being too kind to both halves of the business at once, while I chose to haircut the whole thing.

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4. The Versant ‘Sports Moat’ Is Rented, Not Owned

Then there is what I like to call the Rented Moat. Einhorn leans on live sports as the firewall against cord-cutting. But as a media specialist, let me tell you: USA Network is not a sports network — it is a basic cable channel that happens to show sports. USA Sports is not a standalone cable channel or streaming network. You cannot tune into a channel called “USA Sports” on your program guide. It is a production banner and marketing tool rather than a real destination.

It airs roughly 1,400 hours of live sports a year, about four hours a day, and fills the other twenty with reruns of Law & Order: SVU and Chicago Fire. Crucially, Versant does not own the rights to air any of these properties, such as WWE, NASCAR, or the Premier League. It rents them. Programming is about 55% of total expenses, and roughly half of that budget goes straight to live sports. In a world where Amazon, Netflix, and YouTube are bidding up every live right that comes loose, Versant is paying premium, escalating lease rates to rent eyeballs for a network in terminal decline. That is not a moat, but a margin trap with a countdown timer.

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5. Buybacks Won’t Save a Melting Ice Cube

As I have said many times on Accrued Interest, financial engineering is not a strategy. I learned this lesson the hard way watching the local-TV roll-ups: buying back stock in a structurally shrinking business just rearranges the deck chairs faster. We have seen this movie. It is the Philippe Dauman playbook at Viacom in the 2010s — “look how cheap, look at the yield” — which ended in brutal multiple compression that vaporized the value investors who showed up early for the cash flow. I vividly remember another famous value investor pitching Viacom during the 2010s at Ira Sohn, and I can’t help but wonder if Einhorn is making a similar mistake today.

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6. Kim Kardashian Saved Versant’s Quarter

Einhorn’s presentation had whimsical New Yorker cartoons but was overall light on actual math. So allow me a moment to go deep on VSNT’s Q1 2026 earnings to demonstrate the holes in the bull thesis. I want to show you exactly why I think the “fresh water” analogy is looking a lot more like a leak.

Versant’s earnings headline was solid. Total revenue of $1.687 billion was down only -1.1% year-over-year, with $704 million of Adjusted EBITDA and $286 million of net income. The market cheered. However, when reviewing earnings, I always break down which segments did the heavy lifting — and here, the answer is almost too perfect.

The Beat Was Manufactured by One Kardashian Sale

In the table below, I’ve laid out Versant’s historical revenue performance for Q1 2026 vs. 2025.

Look at that “Content Licensing & Other” line. It was up +112%, for a $64 million swing — the single largest absolute-dollar gain of any segment in the last five quarters. Do not be fooled — this was not organic digital momentum. Most of the gain was a one-off library syndication deal, widely reported to be the E! network’s Keeping Up with the Kardashians catalog licensed to Hulu. On the earnings call, when analysts asked to quantify the exact size of the deal, management was evasive. Let me explain why.

The one-time Kardashian distortion makes investors think there is more organic growth at Versant than meets the eye, but that is sadly not the case.

Strip that $64 million one-off out and Versant’s core revenue was roughly $1.623 billion — an organic decline of about -4.9%, sitting comfortably inside management’s own full-year revenue guide of -3% to -7% YoY declines.

In plain English: Kim Kardashian’s back catalog is the only reason this quarter didn’t look like the disaster the bears predicted. And notice the irony for Einhorn’s thesis. That -4.9% revenue decline is already pacing worse than the -4% blended decline his model forecast for the entire company, and VSNT needed a one-time windfall just to get there.

Selling the Kardashians catalog is a temporary patch, not a structural fix. You cannot sell your library to your competitor every quarter — you eventually run out of shows to sell. Worse, every one of these deals arms the enemy. Versant just handed the back catalog of one of its premium reality franchises over to Hulu (Disney) just to prop up one quarter’s financials, while strengthening a direct streaming rival in the process.

Versant’s Core Business Fell ~$100M While Platforms Only Added $16M

For Q1 2026, Versant’s core legacy television business segments — Linear plus Advertising — shed nearly $100 million of revenue in a single quarter (-$79M and -$20M). Counteracting that — VSNT’s celebrated digital “Platforms” segment only contributed a grand total of +$16 million, which is like using a handful of band-aids to fix a dam leak. This is why I don’t believe Einhorn’s flat +6% YoY growth forecast for the non-Pay TV segments can ever be large enough to matter against the sheer size of the melt.

The Real Tell: A $64M Beat and No Guidance Raise

The most damning thing I noticed in VSNT’s Q1 earnings was that management maintained — but pointedly did not raise — their full-year guidance despite getting a $64 million windfall in Q1. For reference: here was the 2026 guidance presented at the December 2025 Investor day.

Revenue guidance stayed at $6.15 to $6.4B (-3% to -7% YoY), EBITDA at $1.85 to $2.0B (-7% to -14% YoY), and Free Cash Flow at $1.0 to $1.2B (-13% to -27% YoY). (Those percentages are calculated off management’s standalone 2025 revenue estimate of ~$6.6 billion, which is why they look slightly milder than they would be against Einhorn’s $6.69 billion 2025 actual.)

When a company absorbs a one-time beat and keeps the numbers unchanged, it is telling you the underlying decay is accelerating faster than the model assumed. Basically, the windfall is quietly plugging a hole you can’t see yet. Also on the call, CFO Anand Kini flagged higher programming costs from sports-rights timing in the second half, specifically Q4. I feel like Versant is using Kardashian cash to fill a back-half sinkhole.

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7. Einhorn’s Model Pretends the 2028 Cliff Doesn’t Exist

Now we get to the part of Einhorn’s presentation that genuinely stopped me cold — not because of what was in it, but because of what wasn’t. He did not mention Versant’s 2028 cliff. At all. For a thesis whose entire foundation is the durability of Versant’s news and sports portfolio, leaving out 2028 is not a rounding error — it is more akin to ignoring a load-bearing wall. I genuinely don’t know whether Einhorn built this analysis himself, handed it to a junior analyst, or let ChatGPT draft the model. But that omission is precisely the kind of thing that separates a media generalist from a media specialist. You do not find this risk on a screen or in a headline multiple. You only find it by climbing into the weeds of the spin-off documents and then overlaying very specific, hard-won knowledge of how bargaining leverage actually works in practice — not theory — when it comes to television distribution negotiations.

Versant Faces Pressure on Three Fronts at Once in 2028

This is the heart of my bear case — the same one I detailed on the Yet Another Value Podcast and across my January work. Versant is over-earning today under the protective halo of the NBC ad-sales machine. When Comcast spun the company out in January 2026, it handed Versant a two-year Transition Services Agreement to keep riding NBCUniversal’s enormous ad-sales infrastructure. That umbilical cord gets cut in 2028 — and that is when a smooth glide path turns into a step-function cliff. For new readers, let me remind you of the risks involved.

First, Versant loses the “NBC Halo.” It will have to walk into the Upfronts and sell its inventory without big brother’s help — no Peacock, no Sunday Night Football, no NBCU bundle to hide behind — against Amazon, YouTube, Disney, and the rest of the industry. Versant will eventually lose the bundling leverage that, I argue, inflates VSNT’s ad pricing (CPMs) today.

For example - If you go to the web page for Versant’s channel SYFY, when you click the link “Advertise With Us”, it takes you to a landing page where they show you the entire NBCUniversal family. Right now, ad sales clients are being pitched on the value of Versant Media properties mostly due to their connection to the strongest NBC-related channels. NBC, Bravo, and NBC Sports are the high-value anchors for both advertisers and streaming growth, as evidenced by the fact that Comcast kept them to fuel Peacock while spinning off Versant’s networks.

Second, roughly 55% of Versant’s Pay TV carriage agreements come up for renewal at essentially the same time, around 2028. These are the contracts with the cable operators and the vMVPDs (yes, including YouTube TV, the only distributor in the ecosystem actually growing). A company with a shrinking, lower-rated subscriber base is in for a world of pain when it comes to these post-2028 negotiations.

Third, the sports rights renew straight into that weakness — and this is the part that should terrify the bulls, not comfort them. If you happen to believe live sports is the moat, then 2028 is when the moat gets re-priced. Versant’s sports portfolio is essentially the leftover rights NBC could not fit on its main broadcast network.

VSNT is up against the digital war chests of YouTube, Netflix, and Amazon Prime — bidders who no longer answer to legacy-network economics. Post-2028, Versant either loses the rights (and the ratings collapse) or massively overpays to keep them (and the margins collapse). Either way, the company’s enterprise value will inevitably get re-priced downwards. The future of TV belongs to the streamers, with Netflix running the smartest playbook by buying surgical, high-impact events rather than inheriting a full season’s fixed cost.

You cannot model 2028 as “just another” -7% year and then show 2029 as more of the same. That Einhorn’s stock pitch doesn’t even pretend to acknowledge what is clearly Versant’s single biggest risk is why I’m comfortable standing on the other side of this trade.

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8. Versant Management Needs to Stop Empire Building

For newer readers, none of this is a fresh opinion — I have been beating this drum for months. I made the bear case in Is Versant (VSNT) Cheap or Just Cheaply Valued? The Case for $27 and in Is Versant (VSNT) Worth More Dead Than Alive? back in January, broke down the spin in Decoding the Versant Investor Deck, and have hammered the 2028 cliff on the podcast circuit ever since. The thesis hasn’t changed. I think Q1 just handed me the receipts.

The Fix Is Unglamorous: Harvest, Don’t Reinvest

The prescription I have laid out for every melting ice cube — what I call “Project Turn the TV Off” — is simple and unglamorous: stop reinvesting in the decline, preserve and harvest the cash, run the legacy networks as an explicit wind-down or yield-co, and sell the genuinely good assets to private buyers who can actually use them. The strategy has to be to exit, not to tread water or expand.

Versant’s management is doing the precise opposite. Instead of dismantling, they are empire-building — feeding capital into a “growth” narrative to camouflage the core decline. The 2025 / 2026 deal log is a parade of tiny bolt-ons dressed up as a transformation: StockStory, Free TV Networks, a SAG Awards live-programming partnership, and INDY Cinema (quietly rebranded into Fandango). That last one is the tell — they buried the acquired INDY Cinema revenue inside the Platforms bucket, which is exactly how you manufacture a “+9.1% organic” headline that is partly just an acquisition.

They even scrubbed the golf KPIs from their reporting. Remember when Versant disclosed 40 million annual rounds and $4 billion in payments at the December 2025 Investor Day? We have not gotten any updates since. I think management is not sharing the golf business KPIs because those numbers stopped flattering the story, and they don’t want investors to notice.

Versant Is A Bad Bundle Wrapped Around Two Hidden Gems

Here is the framing that matters for the sum-of-the-parts. Versant is a Bad Bundle wrapped around a couple of Hidden Gems. The Bad Bundle — USA Network, E!, SYFY, Oxygen and MS NOW — throws off real cash today, but these are terminal-value-zero assets: renting sports, shedding audiences, and walking straight toward the 2028 cliff. The Hidden Gems — CNBC and GolfNow — are genuinely valuable franchises that would command a real multiple from a focused private buyer. But trapped inside this conglomerate they are suffocated: lumped into opaque buckets, starved of disclosure, and used as narrative props for a melting core.

Conclusion: Versant Is Dead Money Until the Strategy Flips

Einhorn is a brilliant investor and Versant stock is optically cheap — I’ll grant him both. But “cheap” is not a thesis, and a high FCF yield is only a gift if the cash flow shows up the way the model promises.

I still believe the evidence strongly favors the bears. I am reaffirming my Underperform rating on Versant ($VSNT) vs. the S&P 500. The day I wake up to a real reorganization plan, instead of another bolt-on, I will happily change my mind. Until then, I am perfectly comfortable being early — and being on the opposite side of a pitch from one of the game’s best value investors. I will continue to focus on exactly where this company’s true earnings power is headed, regardless of who is buying or selling the stock today.

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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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0. Revisiting Alphabet Amidst a Watershed Capital Event

Last December, on Day 3 of our “12 Days of Pitch-Mas,” I gave readers a simple recommendation: stop overthinking and buy Google. The point was that creativity doesn’t win in this business. The thesis required no contrarian leap or hidden catalyst; just patience while the market caught up to obvious fundamentals.

The market caught up quickly. Google closed at $312 on December 11th, and from there it ran all the way to the $400 mark by May 8th — a roughly +28% move in about five months. The stock has since pulled back modestly, but has still solidly outperformed the S&P 500 since my last deep dive.

Fast forward to present day, and Alphabet is raising $80 billion in equity — its first equity issuance in roughly twenty years. And the size makes it historic: according to data compiled by Bloomberg, Alphabet’s $80 billion equity sale is set to be the largest equity capital markets transaction ever completed, surpassing the roughly $70 billion common + preferred stock sale that Brazil’s Petrobras executed in 2010. (See table below from Bloomberg)

The headline number everyone wants to talk about is the revised 2026 capex guidance of $180 billion to $190 billion. The reflexive reaction has been to ask whether Google is spending recklessly into an AI bubble. I think that framing misses the real story. The more interesting question is not “why is Google spending so much?” but “what does the structure of this raise tell us about the broader economy?”

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1. The Dashboard Advantage Exposes the Information Asymmetry Gap

The standard Wall Street bear case treats hyperscaler capex as a speculative “Field of Dreams“ bet — build it and PRAY that demand shows up. That skepticism is not irrational, but structural. The sell-side is forced to evaluate this spending using lagging indicators. They wait for the quarterly earnings print, and try to reverse-engineer demand from results that are already in the rearview mirror.

Google is not operating on lagging indicators, but on leading ones. Management has something no outside analyst has: real-time KPIs. Their internal dashboards give them visibility into the enterprise cloud pipeline, the length of the compute waitlist, and — critically — the computational requirements of models that have not even been released yet. This is the information asymmetry gap, and it is the entire reason the spend looks aggressive from the outside and obvious to the operators observing these trends from inside Google HQ.

For those who may have forgotten the power of the GOOGLEPLEX, I will help remind you. Google’s Q1 2026 print was one of the strongest quarters the company has ever delivered.

• Total revenue of $109.9 billion, up 22% YoY — Fastest quarterly growth rate since 2022, and its 11th consecutive quarter of double-digit growth.

• Search and Other revenue grew 19% YoY to roughly $60.4 billion. While bears have spent two years insisting GOOGL would be eaten alive by AI chatbots, growth is actually accelerating. The “10 blue links” bear thesis is over.

• Google Cloud revenue surged 63% to about $20 billion, with enterprise AI solutions becoming Cloud’s primary growth driver for the first time.

• Operating margin expanded to 36.1%, and EPS came in at $5.11, demonstrating that operating income is growing even as capex ramps.

Now for the demand signals. Google Cloud’s contracted backlog recently nearly doubled sequentially to roughly $462 billion. Search queries are at an all-time high, running at more than 5 trillion annually, and paid subscriptions have crossed 350 million. When you line it all up, the capex stops looking like a leap of faith.

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2. A Calculated Capital Stack Designed to Protect Existing Shareholders

If the “why” is information asymmetry, the “how” is financial engineering. To understand the architecture, you have to appreciate the architect. Ruth Porat, Alphabet’s President and Chief Investment Officer and former CFO of Morgan Stanley, certainly was involved in this deal. Her Wall Street pedigree is evident in every tranche of this structure, which is built to raise an enormous sum while inflicting the least possible damage on existing shareholders.

Bear with me for a minute — this section will get a bit more technical. The capital raise can be described in four components:

1)The $40 billion at-the-market (ATM) program. The single largest component, expected to begin in Q3-26, lets GOOGL drip-feed shares into the market rather than dumping a single block and crushing the price. This is the flexible, low-impact backbone of the deal.

2)The $15 billion sale of common stock. A more conventional block, sold concurrently to seed the raise and anchor institutional demand.

3)The $15 billion mandatory convertible preferreds. This is the most surgical piece. The preferreds secure cash today but, because they convert in roughly three years, delay the actual equity dilution until 2029. That is a duration match, and a deliberate one: the new common shares hit the market at almost exactly the moment the newly built data centers are throwing off free cash flow. Management is timing the dilution to coincide with the earnings it is meant to fund — you take the hit to your share count right when the assets you bought start paying for themselves. As a bonus, mandatory convertibles are typically a cheaper source of capital than debt and are frequently treated by the ratings agencies more like equity than debt.

4)The $10 billion Berkshire Hathaway private placement. (I will come back to this.)

Sitting on top of the convertible tranche, Google also purchased capped call options — essentially derivative insurance policies — to synthetically raise the effective conversion premium. In plain English, they bought protection on the upside so that common shareholders keep more of the gains if the stock appreciates before 2029. This signals how defensive the whole thing was structured.

Now - here are two more strategic considerations, unrelated to the deal structure.

A)I think Google is partially front-running several mega IPOs. Anthropic, SpaceX, and OpenAI are all aiming to go public later this year. The timing here was not subtle: Alphabet announced its raise just days before SpaceX is expected to begin marketing what could be the largest IPO of all time, effectively stealing its thunder and getting to the front of the line. The early read is that it worked, with the common and convertible tranches reportedly oversubscribed.

B)Google is preserving its debt arsenal. They could have funded this with another jumbo bond, but doing so would have used up their debt capacity in one shot. By raising equity instead Google keeps its powder dry.

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3. Weaponizing the Balance Sheet to Secure Constrained Supply

Raising the cash is only half the play. The other half is what they do with it.

First, the primary bottleneck in the AI race is not capital but physical supply. From transformers to specialized labor, the supply chain is severely strained. By weaponizing its massive cash reserves to secure priority access, Alphabet is effectively jumping to the front of the line.

Next, there is a second-order effect here that benefits the suppliers too. By handing out guaranteed, multi-year, non-cancellable contracts, Google is effectively removing the boom-and-bust cyclicality that has historically plagued industrial component manufacturers. A transformer maker that knows it has years of locked-in Google orders can invest in expanding its own capacity with confidence. That stability is valuable — and it is exactly why suppliers will prioritize Google over a smaller buyer waving a one-off purchase order.

The third, most competitive effect: securing physical supply early effectively starves the competition. Every transformer and cooling unit Google locks up is a unit smaller competitors cannot buy.

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4. Treating AI Datacenters as the New American Infrastructure

If you want validation that this is an infrastructure play rather than a software gamble, look at who showed up to write a check. Greg Abel and Berkshire Hathaway committed $10 billion via a private placement, securing roughly a 6.5% discount to Monday’s close (buying both Class A and Class C shares at that discount to their respective closing prices before the deal was announced). Berkshire does not chase momentum and does not make speculative bets on technology fads. So why is it here?

I would argue that Berkshire is not looking at this through a “value software” lens at all. Under CEO Greg Abel — who built his career running utilities, pipelines, and energy assets — Berkshire evaluates an investment by asking whether it is a durable piece of essential infrastructure. Through that lens, an AI data center is not a speculative tech asset. It is the 21st-century equivalent of a railroad or a power grid: a digital toll bridge that the entire economy will eventually have to pay to cross.

This is the same firm that under Buffett invested heavily in BNSF Railway and in regulated energy grids — the literal tracks and wires of the old economy. Berkshire views AI data centers as the next pillar in that lineage, and there is a tangible sign that Google sees it the same way. According to Amin Vahdat, Google’s Chief Technologist for AI infrastructure, Alphabet is transitioning toward modular, repeatable data center blueprints — standardized designs that can be stamped out and deployed at scale rather than custom-built one at a time.

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5. Securing the Future From a Position of Valuation Strength

Let me be clear-eyed about the price, because I am not going to pretend the stock is a bargain here. Anchoring on Monday’s close of $376.26, Alphabet is trading at roughly 26x the 2027 GAAP EPS consensus estimate of $14.34, and 22x the 2028 estimate of ~$17.00. The multiple is full and the stock is not cheap.

The overlooked math is simple: an $80 billion raise against a $4.55 trillion market cap is a manageable dilution of about 1.8%. Alphabet could erase that in about a year through its $60B+ annual buybacks. However, I do expect the pace of buybacks to slow during this period of hyper-investment.

The timing of this raise is what separates good management from merely competent management. Rather than rushing to issue equity into the negative sentiment of early 2025 — when tariff fears and “Google is dead” AI panic had the stock under pressure — GOOGL management let that sentiment wash away. They are now selling equity near 52-week highs, taking full advantage of the multiple expansion the market handed them over the past year.

This is George Soros’s theory of financial reflexivity in action. By accepting a small amount of dilution today, Alphabet is securing the physical equipment — the chips, the transformers, the cooling, the land — required to drive its future earnings growth. The dilution funds the assets; the assets generate the earnings; the earnings more than offset the equity dilution.

CONCLUSION

So here is where I land. AI is still in its early innings, and it is severely capacity-constrained. A trillion-dollar buildout is not optional if AI is going to become as ubiquitous as the bulls (myself included) expect. Google stock is taking a natural breather right now as the market digests the dilution, and that is fine. Selling equity from a position of strength, into a full multiple, with the most disciplined investor in the world co-signing the thesis, sets the company up for much larger gains down the road. I firmly believe that Alphabet stock remains an Outperform.

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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) WWE Is Giving Away Its Biggest Match for Free — On Purpose

Ryan Glasspiegel’s May 29th piece for Front Office Sports, “Why WWE Is Airing One of Its Most Anticipated Shows on YouTube,” offers an insightful look at WWE’s digital media innovation. He highlights how the company is utilizing Lucha Libre AAA Worldwide content, specifically the highly anticipated Noche de Los Grandes match in Monterrey. While traditional industry wisdom would suggest placing such a high-profile event on WrestleMania or an ESPN+ Premium Live Event, WWE has opted to stream it for free on YouTube.

To a lot of people, giving away a year’s worth of built-up anticipation sounds insane. To me, it is the single clearest signal yet of how sophisticated WWE — and its parent, TKO — has become about distribution.

The YouTube Push Is a Deliberate Pattern, Not a One-Off

A few numbers from Front Office Sports‘ reporting that frame how serious WWE has gotten about the platform:

• Massive Scale: The main WWE YouTube channel boasts roughly 113 million subscribers. But the real structural growth is in the network build-out: WWE Vault, WCW, NXT, and individual talent channels.

• Volume: Across these channels, WWE pulled in more than 12 billion views over the past year.

• Engagement Growth: The WWE Vault page alone logged roughly 133.6 million hours viewed over the prior year—up 131% year-over-year—and is closing in on four million subscribers.

• The AAA Playbook: Since WWE acquired the Mexican promotion AAA in April 2025, it has strategically placed the bulk of its Lucha Libre AAA Worldwide content—including the PLEs—on YouTube. Why? Because that content lacks a traditional U.S. linear rights deal. The weekly AAA show averages north of 200,000 viewers, and the recent “go-home” show topped 541,000.

The Accrued Interest Take: TKO Is Playing the Distribution Game in Every Direction at Once

WWE/TKO is one of the most genuinely innovative brands in all of sports entertainment when it comes to monetizing its content across surfaces, and the YouTube strategy is the proof.

What I find impressive is that this is a two-pronged distribution strategy executed deliberately, not by accident. On one side, TKO has navigated the collapse of the linear cable bundle into highly lucrative linear and streaming rights deals — Peacock historically, the move of NXT PLEs to The CW, the flagship product now living on ESPN’s streaming service. On the other side, they use YouTube as the home for rights that do not yet have a U.S. linear component — chiefly AAA. They are not choosing between “old media checks” and “new media reach.” They are taking both.

That is the whole game. The free YouTube match is not WWE leaving money on the table; it is WWE using the largest video distribution platform on earth — and, as their head of digital pointed out, the broader Google ecosystem behind it — as a marketing engine to build storylines, grow new stars, and drive interest back into the paid PLEs that do carry a rights fee.

It is the same “build the habit, then meter it” logic I keep coming back to with Meta and Roku. TKO is, in my view, the cleanest current example of a sports-rights owner using YouTube to simultaneously grow the brand and extract maximum value from multiple networks — linear and streaming — at the same time.

This is also why I am bringing TKO into the coverage universe. As I expand Accrued Interest toward the full set of companies you actually need to understand to make sense of today’s media landscape, you cannot leave out the one live-event franchise that has figured out how to be everywhere at once.

Valuation & Rating: TKO Group Holdings ($TKO)

So while I love TKO’s business and its strategy…I want to point out that it is a very fairly valued stock at today’s price.

TKO trades around $205 per share. On consensus GAAP EPS, that is roughly 43x 2027 (about $4.75) and roughly 34x 2028 (about $6.00) — estimates via TIKR.com. The stock is up almost 30% over the last year, which slightly beats the S&P 500.

This is not a cheap stock. I think the strategy is excellent and the assets — WWE, UFC, and the rest of the live-event portfolio — are close to irreplaceable. But “great company” and “great price” are not the same sentence, and at 43x forward earnings the market is already paying up for a lot of execution.

Accrued Interest Rating: Market Perform, $TKO. I will be covering this name more going forward as I broaden the watchlist toward the winners and the structurally important players in media. The TKO playbook rhymes directly with themes I have written about across the coverage universe. They are pursuing the opposite lesson from Nexstar, where a roll-up of pure-linear assets with no real digital parachute keeps running into a wall. TKO is what it looks like when a rights owner gets distribution right.

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B) The Rebundling Wave Just Got Another Data Point

A recent New York Times piece by John Koblin, Streaming Services Tie Up to Keep You Hooked, lays out how far the streaming “rebundling” trend has come, and the numbers are striking.

Bundles Have Gone From Fringe Experiment to Industry Core

Market Share: Two years ago, bundled offerings made up ~10% of new major-streaming subscriptions. Today, they account for roughly one-third of all new subs and 28% of total subscriptions.

Product Velocity: Since early 2025, approximately 30 new bundled packages have hit the market (e.g., Apple TV & Peacock, AMC+ & Hallmark+).

The New Toll Booths: Large aggregators like Amazon and Roku are successfully pushing subscribers to manage multiple services through a single, unified interface. Traditional players are attempting to keep pace (e.g., YouTube TV’s skinny bundles, Charter pairing Paramount+ and Hulu).

The Holdout: Netflix, the most dominant paid streaming service globally, has stubbornly—and smartly—refused to team up.

The Accrued Interest Take: This Is Consolidation Wearing a New Costume

This is yet another example of the rebundling trend I have been tracking, and I read it the same way I always do — as consolidation. The dominant distribution platforms are quietly reassembling the cable bundle, just with a streaming front-end. The more powerful providers act as the new distributors stitching the individual services back together.

And the “who” matters. Streaming services are increasingly leaning on aggregators like Amazon and Roku to be the new rebundlers. This connects directly to my decision last week to initiate coverage on Roku — the toll booth at the front door of the living room is exactly the kind of business that benefits when everyone decides the answer to churn is to bundle through a third party.

Because that is the real point here: bundling’s job is to lower churn, and lowering churn is arguably the single biggest driver of streaming growth — more important than any individual piece of content. When David Zaslav describes the HBO Max / Hulu / Disney+ bundle as “as close to a solve as you’re going to have” on churn, that is the whole thesis in one quote. Content gets you the sign-up; the bundle keeps you from leaving.

Netflix Doesn’t Need a Bundle — And That’s the Tell

The most important detail in the NYT piece is the one thing that didn’t happen: Netflix, the clear number-one service, has not partnered with anyone. It does not need to. That is exactly what you would expect from the de facto anchor service — the one everyone else has to bundle around. This reinforces my long-standing view that Netflix is the continued winner of the streaming wars (with YouTube as the other giant) and the service least exposed to the churn problem that is forcing everyone else to link arms.

Valuation & Rating: Netflix ($NFLX)

Netflix currently trades around $85 per share. On consensus GAAP EPS, that is about 22x 2027 ($3.86) and about 18x 2028 ($4.56). For the dominant, most durable, lowest-churn platform in the category — the one that gets to stay a stand-alone storefront while competitors merge their checkout lines — that is too cheap.

Accrued Interest Rating: I am reiterating my Market Outperform on Netflix (following the Market Perform I assigned to Roku last week).

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CONCLUSION

Two stories, one lesson: in modern media, distribution strategy is the strategy. TKO refuses to pick a lane, successfully monetizing marquee linear/streaming rights while weaponizing YouTube to feed the top of the funnel. Conversely, the rebundling wave exposes a streaming industry racing to solve churn by linking arms through aggregators like Roku—leaving Netflix sitting untouched at the center of the ecosystem.

Follow the distribution, follow the churn, follow the cash flow.

- Accrued Interest

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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 Quick Housekeeping Note: Goodbye Fubo, Hello Roku

Before we get into today’s news, a formal change to the Accrued Interest coverage universe. I am officially dropping coverage of Fubo TV. The fundamental risks are simply too high, and the platform remains sub-scale in a market that increasingly demands massive reach to matter. I previewed this back in my April 16 update, and today I am making it official.

In its place, I am expanding coverage of Roku ($ROKU) — the premier pure-play connected-TV distributor and, in my view, the toll booth at the entrance to the streaming ecosystem. Section B below is the start of that deeper commitment. As always, if there are other publicly traded TMT names you want me to dig into, drop them in the comments!

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A) Meta Is Finally Building Its Second Revenue Engine

Meta is moving aggressively beyond its traditional ad-supported model on two fronts at once.

First, on the consumer and creator side, the Wall Street Journal reported that Meta has begun rolling out paid subscription tiers across its core apps to help recoup the cost of its enormous AI buildout. Rather than burying these inside a dense paragraph, let’s lay out exactly what this new monetization matrix looks like:

• Facebook & Instagram Plus: $3.99 / month

• WhatsApp Plus: $2.99 / month

• Meta AI Basic: $7.99 / month

• Meta AI Premium: $19.99 / month (unlocking higher structural limits on Thinking Mode, long-form video, and high-fidelity image generation)

Crucially, Meta’s product chief Naomi Gleit framed these plans as including not just consumer features but “premium tools for businesses and creators.” Notably, after the announcement the stock closed up 3.7% — a tidy contrast to the more than 5% after-hours drop the company took last month when it told investors it would spend even more on AI.

Second, and more important to my thesis, The Information reported that Meta is standing up a new internal organization called Enterprise Solutions — staffing product managers, data engineers, and software engineers to embed directly inside large corporate customers and integrate Meta’s AI tools into the legacy systems those companies actually run their operations on. This is the classic “forward-deployed engineer” playbook, the same high-touch model Google, OpenAI, Nvidia, and Anthropic are all racing to build out. Gleit’s internal memo explicitly cites the goal of building “repeatable playbooks and tooling along the way so the work can scale over time.”

For context on the starting line: last quarter Meta reported just $885 million in non-advertising “other revenue” against roughly $55 billion in ad revenue, and last year a stunning 98% of total revenue came from advertising. This is a company taking its very first real steps off a one-legged stool.

The Accrued Interest Take: Set Aside the Noise

Let me start where I always do with Meta: separate your personal feelings from your investment thesis. People love to air their political grievances and personal outrage about social media companies, and about Mark Zuckerberg specifically. That is fine for cocktail parties. It is useless for portfolio construction. The brutal, repeatable truth is that consumer habits persist regardless of what people say — they keep using the platforms, no matter how loudly they complain. Underwrite the behavior, not the discourse.

Meta is not a “social media company.” It is critical infrastructure for small and medium businesses worldwide. If you run an SMB in 2026, Meta is simultaneously your global storefront, your targeted marketing agency, and — increasingly — your automated customer service rep and ad-creative studio. That is not a novelty. That is a utility you cannot turn off without losing customers.

And this is the part the bears keep missing: Meta’s AI is not a chatbot for making funny images. It is a super-computer in your pocket that solves real logistical and conversion problems for businesses. It supercharges the advertising tools that already dominate the market, delivering a positive, measurable ROI on Meta’s gargantuan AI capex today, not in some hand-wavy 2030 terminal-value fantasy. The Enterprise Solutions org is simply Meta putting engineers in the room to make sure that ROI shows up on the customer’s P&L — and, in turn, on Meta’s.

The $20 Billion Bridge. As I outlined in my deep dive, Back to the EBITDA: Decoding Meta’s $1,116 Executive Playbook, management’s incentive structures require massive, sustained growth to clear the $1,100+ stock-price hurdles where executives actually get paid. In that piece I specifically flagged “The $20 Billion ‘Other Revenue’ Bridge” as the critical alternative revenue stream Meta would need to hit those targets — scaling a roughly $3 billion “Family of Apps – Other Revenue” line toward $15–$20 billion, built on buckets like a WhatsApp Business communication toll-bridge, AI-agent SaaS, and in-thread commerce.

These Announcements Are That Bridge Under Construction. These new enterprise AI subscriptions and the Enterprise Solutions org are exactly how Meta builds that bridge. Every dollar of recurring software revenue diversifies the income statement and makes Meta a more economically durable machine — one that is no longer 100% hostage to ad pricing. Stack that on top of the strong ad-impression growth I expect to continue compounding through 2026, and you have a top line being attacked from two directions at once.

Valuation & Rating: Meta ($META)

Meta currently trades around $637 per share. On forward earnings, that is just ~18x 2027 consensus GAAP EPS of roughly $35, and an almost comically cheap ~16x 2028 consensus GAAP EPS of roughly $40 (estimates via TIKR).

Let me be blunt: these multiples are far too cheap. A business with this level of free cash flow, this much operating leverage, and genuine utility status for millions of advertisers should not be trading below the broader market multiple. The market is still pricing Meta like a cyclical ad name with a capex problem. I am pricing it like an indispensable utility that is quietly bolting a recurring-revenue engine onto the side of the best ad machine on the planet.

Accrued Interest Rating: I continue to expect Meta to outperform vs. the S&P 500.

Relevant Accrued Interest articles on META:

2026.04.30: The Street Missed the Q1 Signal: Why Meta’s AI Engine is Worth Every Penny

2026.04.21: AI Tracking Employee Keystrokes Validates Meta Bull Case

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

2026.02.10: Meta Q4 2025 Recap

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B) Roku Is Rebuilding the Front Door of the Living Room

Roku is overhauling its homescreen — the iconic app grid — for the first time in over a decade.

The Hollywood Reporter detailed the user-experience side: the static grid is becoming a dynamic, personalized, content-forward discovery hub. Your most-used apps get featured more prominently, a “Top Picks for You” section surfaces recommended apps and programming, and — the key commercial detail — a large “marquee” ad spot now sits front and center to promote apps or shows. Roku City survives (and goes interactive), there are new genre-based destinations, and the homescreen will even adapt by household, showing a different layout on the kids’ playroom TV than on the adult bedroom set. Founder and CEO Anthony Wood said the redesign “puts entertainment at the center of everything.”

Bloomberg covered the financial mechanics behind the redesign: a new AI-powered, personalized homescreen that learns user habits, shifts throughout the day based on who is watching, and — critically — “opens up more ad opportunities.” VP of viewer product Preston Smalley was careful to stress that Roku won’t get aggressive to the point of alienating users: “we’ll never shove it in people’s faces.” That balance matters, because advertising is already the engine here — of Roku’s $4.74 billion in total 2025 revenue, $4.15 billion came from its high-margin platform segment.

The Accrued Interest Take: The Power of Habit

Here is why this matters more than a typical UI refresh: Roku has become the ingrained, habitual “first destination” for the modern television viewer. Turning on a Roku TV in 2026 is the behavioral equivalent of flipping on the cable box in 2006. It is muscle memory. And Roku shares that elite, default-destination status with only a tiny handful of names — essentially Netflix and YouTube. When you control the very first screen a hundred million households see every night, you control the most valuable real estate in the living room.

The 100 Million Milestone. As I wrote in the April 16 Accrued Interest update, Google Drops the Halo, Ad-Tech Desperation at OpenAI, and Roku’s 100 Million Milestone, crossing the 100-million active-household threshold proved Roku is a major, undeniable player in digital video — a proxy for close to full distribution in North America. To quote that piece directly:

“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.”

Unlocking the Prime Real Estate. The homescreen is Roku’s single greatest promotional asset, and frankly it has been under-monetized for years. Historically, Roku has leaned heavily on distribution revenue — taking a recurring cut or bounty on SVOD sign-ups routed through its billing system.

This redesign represents an aggressive tactical shift. By turning the home screen into a dynamic billboard, Roku is directly pursuing high-margin top-of-the-funnel brand advertising revenue captured right at the point of entry, before the viewer has even clicked open an app. This is Roku’s most valuable impression in the connected TV ecosystem. It allows Roku to step directly into the legacy-TV upfront infrastructure and intercept brand dollars before they dissolve into individual content libraries. It is the necessary next step to fully monetize the massive distribution scale they have already won.

Tie that back to the financials: the entire bull case for the stock rests on driving higher average revenue per user (ARPU) against that ~$4.15 billion platform-revenue base. A premium, brand-friendly marquee unit on the homescreen — sold to exactly the legacy-TV advertisers who now need Roku to reach a national audience — is the most direct ARPU lever the company has.

Valuation & Rating: Roku ($ROKU)

Roku currently trades around $130 per share. That works out to roughly 37x 2027 GAAP EPS of about $3.50, and ~25x 2028 GAAP EPS of about $5.20.

I will be honest: this is not optically cheap. But I read it as growth at a reasonable price (GARP) for a company that has cemented itself as a major, toll-collecting gatekeeper in the new digital distribution regime. The scarcity value of being one of only a few true “first destinations” in the living room deserves a premium — I just don’t think today’s price leaves enough margin of safety to be banging the table. As the homescreen redesign actually shows up in ARPU over the next several quarters, the multiple becomes a lot easier to defend.

Official Rating: Market Perform,

Relevant Accrued Interest articles on ROKU:

2026.04.16: Google Drops the Halo, Ad-Tech Desperation at OpenAI, and Roku’s 100 Million Milestone

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CONCLUSION

Two different companies, one identical strategy: find a habit consumers already can’t quit, then build a new, higher-margin meter on top of it. Meta owns the habit of how the world’s businesses reach customers, and it is bolting a recurring software-and-subscription layer onto an ad engine the market still refuses to fully credit — which is exactly why it stays an Outperform at a below-market multiple. Roku owns the habit of how a hundred million households start watching television, and it is finally turning that first screen into premium inventory — a real and durable advantage, even if the Market Perform valuation already reflects a good chunk of it.

The through-line for subscribers is the same one I keep coming back to: ignore the noise, underwrite the behavior, and follow the cash flow. The habits are sticky. The monetization is just getting started.

- Accrued Interest

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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) Fox’s World Cup Bargain Is a Sweetheart Deal That Will Never Be Repeated

A new New York Times piece from Tariq Panja lays out exactly how Fox secured the English-language U.S. broadcast rights to next month’s 2026 World Cup for less than $500 million. The headline number is a total commitment of roughly $485 million, including a bonus tied to the tournament being staged largely in the United States. Industry experts peg the true open-market value of these rights today at somewhere between $1 billion and $1.5 billion.

How a Backroom Deal Became a Bonanza

The mechanics here are vintage FIFA. Let me summarize the backstory. Back in 2014, the governing body had a problem of its own making. It had awarded the 2022 World Cup to Qatar, whose brutal summer heat forced the tournament out of its traditional June-July window and into November and December—dropping it squarely on top of the most crowded stretch of the American sports calendar, competing head-to-head with the NFL, the NBA, and the NHL. Fox had paid a then-record $425 million for the 2018 and 2022 tournaments on the explicit assumption of summer dates. Rather than risk litigation over moving the goalposts, FIFA simply handed Fox an extension to the 2026 rights more than a decade in advance—with no open bidding process whatsoever. Telemundo and the Canadian rights holder got the same treatment.

The Math Is Almost Comical

The article lays out economics that underscore just how lopsided this is. Daniel Cohen of the advisory firm Octagon estimates Fox will recoup its entire investment on advertising alone—and advertising is only 30-40% of total World Cup revenue, with the bulk coming from retransmission fees, plus another ~$70 million from the 30 matches airing on FS1. He compares the upside to the legendary bet CBS and Turner made on March Madness.

John Skipper, ESPN’s president from 2012 to 2017, was even blunter, telling the Times that “FIFA has left hundreds of millions of dollars on the table.” Viewership could climb 30% above the Qatar numbers, which already delivered Fox a record 16.8 million English-language viewers for the Argentina–France final. For context, FIFA itself is budgeting record revenue north of $11 billion this cycle—$4 billion more than the last World Cup.

The Accrued Interest Take: Broadcasters Should Enjoy It While It Lasts

Regular readers know I have been bullish on Fox as the strongest of the legacy broadcasters—I laid out my Outperform case last summer in Fox Corp ($FOXA): Unlocking Hidden Value in Gambling & Streaming. But let’s be honest: there is no prize for being the tallest building in a city that is actively crumbling. And critically, my Fox thesis never rested on renting marquee sports. The variant perception I laid out last year rested on Tubi and the FanDuel/Flutter optionality that I thought the market was overlooking—durable, owned assets—not a once-in-a-generation discount that fell into Lachlan Murdoch’s lap because the men who negotiated it were later swept up in a Department of Justice corruption probe. Do not capitalize a fluke.

Here is the structural reality: unless Fox shares or splits the ballooning cost of future rights with a larger tech platform, this is almost certainly the last World Cup that is economical for them to carry alone. The biggest single driver of U.S. television remains NFL football, and there Fox—like every legacy player—is staring down crushing, rising programming costs. We saw the template when the NFL reportedly demanded a 50% fee increase from Paramount’s CBS just to extend the same Sunday package. Legacy networks are increasingly being held hostage by the leagues, forced to pay margin-crushing premiums simply to defend their existing viewership baselines.

This is also a flashing warning sign for the names in my coverage universe that are leaning on future sports rights as a value pillar—chiefly Versant ($VSNT), which I continue to rate Underperform. I have argued repeatedly, including in Is Versant (VSNT) Worth More Dead Than Alive? and on the Yet Another Value Podcast, that Versant is over-earning today under the protective halo of NBC’s ad-sales machine, and that its sports portfolio is largely leftover rights NBC could not fit on its main network. When that umbilical cord is cut in 2028, Versant loses leverage and those rights get re-priced on the open market—into a world where the deep-pocketed bidders are no longer legacy networks. The deal Fox got is a relic. The future belongs to the digital war chests of YouTube, Netflix, and Amazon Prime, with Netflix in particular running the smartest playbook—buying surgical, high-impact events rather than inheriting the fixed cost of a full season, as I detailed in The Victor of the Streaming Wars.

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B) YouTube Has Officially Become the Neutral Switzerland of Digital Entertainment

Pivoting to the digital side, Digiday’s Sara Guaglione reported that Bleacher Report—owned by Warner Bros. Discovery ($PSKY) and operating under its TNT Sports division—has launched a dedicated YouTube channel to house its “B/R Cartoons” animated franchise ahead of the World Cup. The channel pulled in over 20,000 subscribers in its first week, and it is anchored by genuinely valuable IP: the eighth season of The Champions returns for the tournament, a series that has averaged nearly 4 million views per episode, while Gridiron Heights has racked up over 150 million views across 10 seasons.

The “Problem” Tells You Everything

What I find most revealing is how B/R framed the “problem” it was solving. Despite enormous reach, the animated content lived and died in the fragmented comments sections of B/R’s general social handles.

B/R’s soccer vertical alone logged the following views in April 2026 (per Tubular Labs):

• Instagram: 264 million

• TikTok: 13 million

• Facebook: 5.8 million

• YouTube: 4.2 million

These stats quietly illustrate why it is so hard to escape the gravity of not just Google, but Meta as well. And make no mistake about the value of what B/R is moving: per a company spokesperson, the cartoons carry “the highest average completion rate of any B/R original content format,” averaging north of 75% across franchises. GM Drew Muller described that animation audience as “the most avid, the most committed, the most sticky” group across the entire company. This is not throwaway filler. It is arguably their most engaged owned audience—and they are choosing to anchor it on a competitor’s platform.

The Accrued Interest Take: Legacy Media’s White Flag

I have been pounding the table on this trend for more than a year:

It is the ultimate aggregator, and even a digital-first brand with the name recognition of Bleacher Report concludes that the smartest move is to outsource distribution to Google rather than build its own destination.

That is the part worth sitting with. A few years ago, it would not have been crazy to expect a legacy conglomerate to try to build a bespoke platform to house and monetize this kind of beloved IP in-house. After all, legacy media executives love to give interviews about “taking on Big Tech.” Instead, the normalized, rational outcome is to hand the keys to YouTube—because that is where the audience, the recommendation algorithm, and the brand-safe ad dollars actually are. (As Digiday’s sources note, premium advertisers like Nike will show up against animation in a way they will not against hot-take commentary—which is exactly why YouTube’s neutral, brand-safe rails are so valuable.)

The PSKY Parallel

Use this as one more nail in the coffin of the Paramount Skydance ($PSKY) narrative, which I continue to rate Underperform and laid out in Dead on Arrival: 8 Reasons the Paramount-WBD Merger Will Fail. If WBD’s Bleacher Report—a savvy, digital-native operation—has to lean on Google’s infrastructure just to find and monetize its own fans, what realistic chance does a debt-laden, integration-paralyzed Paramount-Warner colossus have of credibly competing with the tech giants on distribution? It is a small data point, but it is directly on theme: the legacy conglomerates are structurally unprepared to take on Big Tech, no matter how often their executives insist otherwise.

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CONCLUSION

Two unrelated headlines, one unmistakable through-line. Fox's World Cup steal and Bleacher Report's YouTube surrender are both reminders that the center of gravity in media has permanently shifted. The marquee events are migrating to whoever has the biggest balance sheet and the best digital rails, and the distribution layer increasingly runs through a single neutral utility. That is why Google remains an Outperform and, in my view, the number one media company in the world—it gets to be the indispensable plumbing for the entire ecosystem while extracting the most lucrative economics in digital advertising, exactly the kind of scalable, self-funding ad machine I described in The Pokémon Theory of Media Investing. Fox can enjoy its discounted World Cup. The structural march toward Big Tech continues regardless.

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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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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.