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Netflix announced a significant first quarter for 2026, with a year-over-year growth of 16% and a confident projection of exceeding $50 billion in full-year revenue. This optimistic outlook is underpinned by sustained membership expansion, strategic pricing adjustments, and a doubling of its advertising revenue, which is anticipated to reach $3 billion. The streaming giant concluded 2025 with an impressive subscriber base of over 325 million paid members, inching closer to a global audience of one billion. Despite this substantial reach, Netflix executives emphasized the considerable untapped potential for further growth, citing its current estimated 5% share of global TV viewing, penetration of under 45% of the addressable market, and a capture of only 7% of the addressable revenue.
"You can pretty much use any measure and say we’ve got tons of room for growth still ahead of us," stated Netflix Co-CEO Greg Peters during an earnings call, underscoring the company’s long-term growth strategy.
This strong financial performance arrives on the heels of a pivotal strategic decision earlier in the year. On February 27, Netflix withdrew from its planned acquisition of Warner Bros. Paramount Skydance. Instead, Paramount Global announced a definitive merger agreement with Warner Bros. Discovery, a move that resulted in Netflix receiving a $2.8 billion termination fee. Coinciding with its earnings report, Netflix also disclosed that co-founder and chairman Reed Hastings will be stepping down from the board upon the expiration of his term in June. Hastings intends to dedicate his time to philanthropic endeavors and other personal pursuits, a decision his colleagues stressed is unrelated to the Warner Bros. transaction.
"Sorry for anyone who was looking for some palace intrigue here, not so," commented Netflix Co-CEO Ted Sarandos on the earnings call, addressing Hastings’ departure.
Looking ahead, Netflix has delineated three primary strategic priorities: enhancing entertainment value for its members, leveraging technological advancements to improve its service, and optimizing monetization, with a significant focus on the continued development of its advertising business. These strategic pillars are expected to take center stage during the streamer’s upcoming upfront presentation to advertisers on May 13.
"Ads is growing but not at the rate marketers expected more than four years ago when the ad tier was launched," noted Emarketer senior analyst Ross Benes via email. "As the company enters a new era without Reed Hastings, advertising will play a bigger role. There’s no better time to amplify an ads business than right now with the upfronts looming."
Building a Robust Ad Business
Netflix executives expressed considerable satisfaction with the trajectory of its advertising business, which was launched in November 2022. The ad-supported tier has proven to be a significant draw, accounting for 60% of all new sign-ups in Q1 within markets where it is available. The company is planning to introduce new products in 2026 designed to offer advertisers enhanced tools for measuring the incremental impact of their ad spend.
The ongoing enhancement of its advertising capabilities, including the development of its proprietary adtech stack, strategic partnerships with demand-side platforms (DSPs), and the refinement of ad products, has fueled a substantial increase in its advertiser base. This has grown by 70% year over year, now exceeding 4,000 advertisers. Programmatic advertising, in particular, is exhibiting robust growth and is on track to constitute more than half of Netflix’s non-live advertising revenue.
"Today, we’re still currently concentrating on those top advertising accounts, the largest buyers, which are serviced primarily by the Netflix sales teams," explained Greg Peters. "That could be directly through our stack or basically a sales team driving buying behavior through DSPs, either of those." He further elaborated, "Over time, we expect continued growth in that number of advertisers. We’re clearly pushing in that direction. We think we’re going to see the percentage of advertisers who buy programmatically increase, and therefore the programmatic share of ad revenue will go up as well."
Netflix solidified its commitment to programmatic advertising through a significant partnership with Amazon in September, enabling programmatic inventory purchases via Amazon’s DSP. Starting in the second quarter, U.S. advertisers will gain access to Amazon Audiences data, drawing upon the e-commerce giant’s extensive first-party data related to shopping, streaming, and browsing behavior. Additionally, Netflix has established a data-sharing agreement with Yahoo DSP, incorporating interest-based, behavioral, purchase, and life-stage data.
These DSP collaborations and advancements in its adtech infrastructure are crucial for Netflix as it constructs the necessary foundation for programmatic advertising and aims to differentiate itself in a competitive streaming landscape. According to Gartner data, brands currently advertise across an average of 4.9 over-the-top (OTT) services.
"The platforms are trying to showcase that they reach a large audience and can be used as single capabilities to reach a large amount of people, like linear TV has always been able to do," observed Greg Carlucci, senior director analyst at Gartner. "The advertisers themselves are also looking for traceability. The next question for a lot of advertisers is, ‘If I’m willing to commit X amount of dollars, how can I trace back with respect to sharing anonymized data to track performance?’ That’s going to be the difference between platforms."
Navigating the Evolving Media Landscape: Nielsen, NFL, and AI
Netflix also addressed several developments within the media and marketing sectors that could influence its advertising endeavors. Executives downplayed the potential impact of recent adjustments to Nielsen’s methodology for its Gauge report, which measures viewing across linear and digital platforms. These changes are anticipated to provide a boost to broadcast and cable viewership at the expense of streaming.
"The Nielsen Gauge is not the currency for the video marketplace, and given that there’s no change in consumer behavior or amount of viewing related to this shift, none of this changes our effectiveness or our aspirations in the ad space," Peters asserted.
Reports indicate that Netflix is exploring an expansion of its existing two-game NFL package to four games, as detailed by The Wall Street Journal. Research from Nexxen suggests that NFL football drives streaming subscriptions for nearly three in four live sports fans. However, on the earnings call, Sarandos clarified that Netflix is more interested in "breakthrough events," such as its current Christmas Day NFL games, rather than larger regular-season packages.
"The NFL is a great property, and it delivers value as part of our total offering, and we are in discussions right now because we think there’s an opportunity to expand the relationship overall, within the same strategy, focused on creating big events for them," Sarandos stated.
The role of artificial intelligence (AI) within Netflix’s operations was also a prominent topic of discussion. Executives highlighted opportunities to leverage AI within the Netflix Ads Suite to facilitate the development of new creative formats, enable the execution of custom ad campaigns, and enhance contextual relevance. Julie Clark, vice president of media and entertainment at TransUnion, noted that these advancements signify Netflix’s ability to effectively bridge premium entertainment, pricing, and advertising.
"Netflix is moving attention into opportunity for marketers, using ads and new formats to potentially deepen engagement and not distract in the viewing experience," Clark commented via email. "The shift needs to move to outcomes, insights, and making environments for brands to show up alongside premium content."
The company’s strategic moves, including its robust financial performance and focused expansion of its ad business, signal a clear intent to solidify its position in the evolving media landscape. With a strong foundation in content and a growing appetite for advertising revenue, Netflix appears poised for continued growth and innovation in the coming years. The departure of Reed Hastings marks the end of an era, but the company’s forward-looking priorities suggest a commitment to adapting and thriving in the dynamic digital entertainment sector. The upcoming upfront presentation is expected to provide further clarity on the company’s advertising strategy and its vision for monetizing its vast global audience.
