Netflix’s advertising strategy is starting to pay off

Netflix She jumped into advertising later than her media counterparts, but her strategy shift is starting to pay off.

Netflix this week reported its fourth-quarter earnings, which were mostly overshadowed by the company’s recent push to acquire… Warner Bros. Discovery Broadcast and studio assets. However, beyond the headlines, metrics like customer engagement, subscriber numbers and ad revenue paint a promising picture.

The earnings report provided some long-overdue clarity on the progress of Netflix’s advertising strategy, and how it’s factored into the business overall. Netflix said Tuesday that its 2025 advertising revenue exceeded $1.5 billion — about 3% of the streaming giant’s full-year revenue — and is expected to double this year.

The company’s total revenue jumped nearly 16% for 2025, while net income rose 26%.

“We’re making good progress and the opportunity ahead of us is tremendous,” co-CEO Greg Peters said on a call with investors Tuesday.

However, Wall Street analysts noted that advertising revenue disclosure was lower than their previous expectations, suggesting that it may take longer than expected to get the ad business off the ground.

“The past two years have been slower than we expected. However, advertising revenue growth is hitting strides and should result in a similar contribution to revenue growth as we estimated in our Q4 forecast,” Deutsche Bank analysts said in a research note on Wednesday.

Robert Fishman of MoffettNathanson noted that total ad revenue was lower than the research firm expected, but he welcomed new insights into the company’s advertising business.

“At least now we can finally get a better understanding of advertising’s contribution to overall growth and we can return to core subscription revenue,” Fishman said in a note on Wednesday.

Netflix shares were trading down about 4% on Wednesday.

Advertising has come to the forefront of media companies’ minds after it became clear that a subscription-only streaming model would not be enough to support profitability.

Advertisers, despite various headwinds, have been eager to find a place on streaming platforms, especially Netflix.

However, the industry leader was late to the advertising game after leadership rejected the business model for a long time. The cheapest, ad-supported tier launched in late 2022, coinciding with a brief slowdown in subscriber additions.

Advertising and a crackdown on password sharing were introduced as measures to drive growth. It happened, albeit slowly.

Netflix said Tuesday that it had 325 million global subscribers at the end of 2025. That represents an increase of about 23 million from the end of 2024, when Netflix last unveiled its paid global memberships.

For comparison, Netflix added approximately 41 million subscribers in 2024 and approximately 30 million in 2023.

Against the backdrop of continuing price increases for streaming services, companies are increasingly relying on the belief that consumers will opt for cheaper, ad-supported plans rather than opt out altogether.

Although there remains a gap between the average revenue per membership on the company’s standard subscription to the company’s ad-free plan and its ad-supported plan, “that gap is narrowing,” Peters said Tuesday.

“Although there is a gap, which means we are not achieving enough revenue growth anytime soon, it also represents an opportunity for us,” Peters said, pointing to upgrading the technology stack and advertising capabilities to help drive growth.