Netflix jumped into the advertising business later than its media peers, but its strategy shift is starting to pay off.
This week Netflix reported its fourth-quarter earnings, which were mostly overshadowed by the company's recent pursuit to acquire Warner Bros. Discovery's streaming and studio assets. However, beyond the headlines, metrics like customer engagement, subscriber numbers and advertising revenue paint a promising picture.
The earnings report provided some long-awaited clarity on the progress of Netflix's advertising strategy, and how it has been factoring into the overall business. On Tuesday Netflix said 2025 advertising revenue exceeded $1.5 billion â about 3% of total full-year revenue for the streaming giant â and is expected to double this year.
Overall company revenue jumped almost 16% percent for 2025, while net income rose 26%.
"We're making good progress and the opportunity ahead of us is massive," Co-CEO Greg Peters said on Tuesday's call with investors.
Wall Street analysts, however, noted that ad revenue disclosure fell short of their previous forecasts, indicating that it could be taking longer than expected to get the ad business off the ground.
"The last couple of years were slower out of the gate than we had estimated. However, advertising revenue growth is hitting its stride and should yield a similar contribution to revenue growth as we had estimated in our pre-4Q forecast," analysts at Deutsche Bank said in a research note Wednesday.
Robert Fishman of MoffettNathanson noted total ad revenue was lower than the research firm had forecast but welcomed the fresh insights into the company's ad business.
"At least now we can finally have a better understanding of the contribution from advertising to total growth and can back into core subscription revenues," Fishman said in a note on Wednesday.
Netflix's stock was trading down about 4% on Wednesday.
Advertising has come front-and-center for media companies after it became clear that a subscription-only streaming model wouldn't be enough to support profitability.
Advertisers, despite various headwinds, have been eager to find a place on streaming platforms, especially Netflix.
Yet the industry leader was late to the advertising game after leadership long rejected the business model. It launched its cheaper, ad-supported tier in late 2022, coinciding with a brief slowdown in subscriber additions.
Advertising and a crackdown on password sharing were put forth as measures to drive growth. And it has, even if slowly.
Netflix said Tuesday it had 325 million global subscribers at the end of 2025. That marks an increase of roughly 23 million from the end of 2024, when Netflix last disclosed its global paid memberships.
For comparison, Netflix added roughly 41 million subscribers in 2024 and almost 30 million in 2023.
Against a backdrop of consistent price increases for streaming services, companies are increasingly leaning on the belief that consumers will opt for cheaper, ad-supported plans rather than drop out altogether.
Peters said Tuesday that while there remains a gap between average revenue per membership of the company's standard, no-ads plan subscription and its ad-supported plan, "that gap is narrowing."
"And while, because there's a gap, it means we're under-realizing revenue growth in the near time, it also, therefore, represents an opportunity for us," Peters said, pointing to upgrading the tech stack and ad capabilities to help drive growth.