On January 20, 2026, a drone photographed the Netflix logo reflected on a building in the Hollywood district of Los Angeles, California, USA.
Daniel Cole | Reuters
Netflix Although it entered the advertising business later than its media peers, its strategic shift is beginning to bear fruit.
This week, Netflix reported fourth-quarter earnings, which were largely overshadowed by the company’s recent acquisition pursuits. Warner Brothers Discovery Streaming and studio assets. But beyond the headlines, metrics like customer engagement, subscriber numbers, and ad revenue paint a promising picture.
The earnings report provides long-awaited clarity on the progress of Netflix’s advertising strategy and how it is factored into its overall business. On Tuesday, Netflix announced that ad revenue in 2025 will exceed $1.5 billion, about 3% of the streaming giant’s total revenue for the year, and is expected to double this year.
In 2025, the company’s overall revenue increased by almost 16% and net income increased by 26%.
“We’re on track and the opportunities ahead are tremendous,” co-CEO Greg Peters said on a conference call with investors Tuesday.
But Wall Street analysts said the advertising revenue disclosure was lower than previously expected, suggesting it may take longer than expected to get its advertising business off the ground.
“While the past few years have been slower than we initially expected, advertising revenue growth is in full swing and we expect it to contribute to revenue growth in a similar way to what we expected in our pre-4Q forecasts,” Deutsche Bank analysts said in a research note Wednesday.
MoffettNathanson’s Robert Fishman noted that total ad revenue was lower than the research firm expected, but welcomed the new insight into the company’s advertising business.
“At least now we finally have a deeper understanding of how advertising contributes to our overall growth, allowing us to regain our core subscription revenue,” Fishman said in a note Wednesday.
Netflix stock fell about 2% on Wednesday.
Advertising has become central to media companies after it became clear that subscription-only streaming models were not enough to support profitability.
Advertisers have worked hard to find a home on streaming platforms, especially Netflix, despite various headwinds.
But industry leaders have been late to the advertising game as executives have long rejected the business model. The company launched a cheaper ad-supported tier in late 2022, coinciding with a temporary slowdown in subscriber growth.
A crackdown on advertising and password sharing was introduced as a measure to promote growth. And it happened, even if slowly.
Netflix announced on Tuesday that it had 325 million global subscribers at the end of 2025. This is an increase of approximately 23 million people since the end of 2024, when Netflix last released its worldwide paid membership numbers.
For comparison, Netflix added about 41 million subscribers in 2024 and reached almost 30 million in 2023.
With consistent price increases for streaming services, companies are increasingly betting that consumers will opt for cheaper ad-supported plans rather than abandoning the service altogether.
Peters said Tuesday that while there is still a gap in average revenue per subscription between the company’s standard ad-free plan and its ad-supported plan, “that gap is narrowing.”
“The gap means near-term revenue growth is not fully realized, but it also represents an opportunity for us,” Peters said, noting that the company will upgrade its technology stack and advertising capabilities to drive growth.
