All is not well for Netflix, Inc. (NASDAQ:NFLX), and things might get worse. The stock is down roughly 20% this year, and institutional investor positioning points toward growing caution. Netflix’s widening YouTube threat is increasingly harder to ignore.
According to Nielsen, YouTube viewing rose 6% from June, bringing its share of U.S. television viewing to a record 14.2% in July. Netflix’s share was 7.8%. YouTube has become a major living-room viewing destination, rather than simply a platform for short-form or mobile videos. HSBC argues that YouTube’s gains are increasingly coming at Netflix’s expense.
HSBC downgraded Netflix to a Hold from a Buy on September 22. It also cut its price target on the stock to $76 from $96. HSBC argued that YouTube is taking viewing share from Netflix. It added that a near-term recovery for Netflix looks unlikely. Wells Fargo also downgraded Netflix on September 18, citing the platform’s weakening viewership.
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In the video streaming business, engagement supports retention, pricing power, and advertising economics. So if Netflix is losing viewership, the foundation of its entire business is up for debate.
YouTube Is Competing for Both Viewers and Creators
The competitive storm that Netflix, Inc. is facing from YouTube might just be getting stronger.
Bloomberg reported in August that YouTube has discussed offering millions of dollars to popular creators to upload their videos to the site exclusively. YouTube has explored arrangements including direct program financing and brand deals to keep the creators from taking their videos to Netflix, at least for some time.
That represents a countermove, as Netflix itself has been trying to woo YouTube creators to its own platform.
In that move, you can see YouTube strengthening the supply side of its platform at a time when it’s already eroding Netflix’s view share. That could raise costs for Netflix. If YouTube succeeds in retaining its top creators while it continues to expand its living-room viewing, Netflix may need to spend more just to defend its engagement.
Wells Fargo lowered its 2027 and 2028 operating margin forecasts for Netflix, saying that a weaker content slate could require increased investment.
Netflix Has a Fighting Chance, Though Not Much Time on Its Side
But the bear case is not conclusive yet. Netflix, Inc.’s figures show that the platform exceeded 97 billion viewing hours in the first half of 2026. The company said that was a record for a first half. That strong viewing was supported by several new and returning series drawing large audiences. For instance, His & Hers views reached 104 million, while Bridgerton Season 4 views hit 100 million.
So at this point, it’s not yet established whether Netflix’s weaker engagement is structural or simply a temporary content-cycle problem. If a successful second-half slate restores viewing, it would weaken the argument that YouTube has fundamentally eroded Netflix’s competitive position.
Investor Positioning Raises the Stakes
There’s growing caution toward Netflix, Inc. among elite investors. According to Insider Monkey’s database, Netflix’s popularity with hedge funds has been declining in recent quarters. It fell to 121 funds in Q2 from 144 in Q1 and 146 in Q4. At the same time, short sellers are strengthening their bets. Short interest in Netflix recently increased 1.1%, though it remains modest at only 2.22%.
While Netflix’s total views are still strong, there’s a real threat of YouTube forcing the company to spend more simply to survive.
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