This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Companies split their stocks to make it easier for retail investors to own shares.
- A company should only split its stock if it is confident in its long-term growth.
- Netflix and Meta Platforms have clear growth runways to justify stock splits.
There were a flurry of stock splits last year, including Nvidia, Broadcom, Chipotle, and Walmart, among others. But 2025 hasn't been nearly as active a year for stock splits.
That could change in 2026.
Here's why Netflix (NASDAQ: NFLX) and Meta Platforms (NASDAQ: META) stand out as top candidates to split their stocks in 2026.
When stock splits make sense
Stock splits provide an opportunity to make a company's shares more accessible to smaller investors with limited capital. While they are less important in today's age of zero-cost trading and fractional shares, companies will still pursue stock splits for other benefits like employee compensation and psychological appeal too.
For example, Berkshire Hathaway offers class A shares and class B shares. At the time of this writing, A shares trade for around $750,000 compared to $500 for B shares, with each B share making up 1/1,500th of an A share. If given the choice to invest $500 in B shares or buy 1/1,500th of a fractional share of class A, many investors will prefer the simplicity (and satisfaction) of owning one full B share.
It's also worth noting that options contracts are typically packaged in increments of 100 shares. A lower stock price can increase interest from smaller investors who are looking to buy or sell options.
Despite these benefits, a company should only execute a stock split if it is confident it can grow its value and, in turn, its share price over time. Oracle split its stock a staggering six times between 1995 and 2000. It was too much, too fast. The dot-com bubble burst, and it took over 15 years for Oracle to exceed its all-time high from 2000. Oracle has not split its stock since then.
Netflix and Meta could split next year
Netflix and Meta have what it takes to continue compounding in value, setting the stage for stock splits in 2026.
It's been over a decade since Netflix last split its stock. The company is a completely different business today, shifting its focus from growing revenue and subscribers to cash flow and profitability. Netflix is achieving impeccable results despite much more difficult competition from legacy media companies that are expanding their streaming offerings, as well as tech companies like Apple and Amazon that offer their own services as well.
By 2030, Netflix plans to triple operating income from 2024 levels, grow operating income faster than revenue (thus expanding margins), and hit a $1 trillion in market cap. With a share price over $1,200 at the time of this writing, I could see Netflix splitting its stock by 7-for-1 in 2026, which is the same ratio as its split in 2015.
Since its initial public offering in 2012, Meta has never split its stock. It is the only member of the "Magnificent Seven" or "Ten Titans" to have never done so -- and for good reason. It's easy to forget that Meta fell below $100 per share in the fall of 2022 as investors heavily criticized management's decision to invest in the metaverse. The company recovered because it unlocked massive engagement increases through short-form videos, which made Instagram more attractive for advertisers.
Artificial intelligence (AI) was another big change for Meta, as the company has fine-tuned its algorithm to further boost engagement and provide useful metrics for advertisers. In short, Instagram has become one of the most sought-after platforms for targeted digital advertising. And Meta's share price is now over $700, a remarkable recovery in less than three years.
Like Netflix, Meta is now consistently profitable and raking in free cash flow (FCF). In the last three years, Meta has increased its FCF by 163%, and Netflix has boosted its FCF more than fivefold. What's particularly impressive about Meta's FCF growth is that it is spending a record amount on capital expenditures to boost AI infrastructure. Without that AI spending, FCF would be much higher. But investors would probably prefer the company to invest in long-term growth, given the potential reward. I could see Meta announcing a 5-for-1 split next year.
Two potential Dow Jones components
Netflix and Meta's industry leadership, profitability, and international growth potential give both companies the green light to split their stocks in 2026. Another reason these companies may split their stocks is to get added to the Dow Jones Industrial Average.
For a stock to be added to the Dow (which is a price-weighted index), its stock price can't be too high, or it would excessively shift the balance of the index. It's worth mentioning that Nvidia, Amazon, and Sherwin-Williams all underwent stock splits before being added to the Dow in 2024. Adjusted for splits, all three stocks had a share price below $400 when they were added to the Dow.
A glaring flaw in the Dow is that it doesn't have exposure to social media. With two large cloud providers already in the Dow (Amazon and Microsoft), Meta might have a better chance of replacing Verizon Communications than Alphabet.
A less likely scenario is that Netflix replaces Walt Disney in the Dow. Disney has been underperforming the broad market for years, but it has made substantial headway in monetizing its streaming business recently.
Beyond the typical benefits, stock splits would also position Meta and Netflix for consideration in the event of further Dow Jones index shakeups in 2026.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
