Netflix’s Ad Strategy Shows Early Success
Netflix entered the advertising business later than other media companies, but its approach is beginning to pay off.
This week, the company released its fourth-quarter earnings, which were overshadowed by its potential acquisition of Warner Bros. Discovery’s streaming and studio assets. Still, metrics like ad revenue, subscriber numbers, and customer engagement reveal a promising trend.
Advertising Revenue Climbs
Netflix reported that its 2025 advertising revenue exceeded $1.5 billion, about 3% of total annual revenue. The company expects this figure to roughly double in 2026. Overall revenue grew nearly 16% last year, while net income rose 26%.
Co-CEO Greg Peters said on the earnings call, “We’re making good progress, and the opportunity ahead is massive.”
Wall Street analysts noted that ad revenue came in below their previous expectations. Deutsche Bank said, “Growth is hitting its stride, but it could take longer than expected to fully realize the ad business’s potential.”
Late Start in Ads
Netflix was slow to adopt advertising after previously rejecting it. The company launched a cheaper, ad-supported tier in late 2022. At the time, subscriber growth had briefly slowed.
Advertising, along with a crackdown on password sharing, became central to Netflix’s strategy to drive growth. So far, these measures are working, even if gradually.
Subscriber Growth Continues
Netflix reported 325 million global subscribers at the end of 2025, up about 23 million from the end of 2024. For context, the company added around 41 million subscribers in 2024 and nearly 30 million in 2023.
Despite ongoing price increases across streaming platforms, many consumers are choosing the cheaper, ad-supported plans rather than leaving Netflix.
Narrowing Revenue Gap
Peters said the difference in revenue between the ad-supported plan and the standard no-ads subscription is narrowing. “While the gap means we’re under-realizing revenue growth now, it also represents a growth opportunity,” he explained. The company plans to improve its technology and ad capabilities to boost earnings further.
