Advertising is still in its early innings
Recurring subscription payments from a huge global base give Netflix unusually predictable revenue.
Netflix, Inc.: Paying for Attention, Every Month
Netflix charges people a monthly fee to watch its films, series, live events and games, and now sells advertising alongside them too.
NASDAQ:NFLX
$80.50+0.01%
Updated: Aug 17, 2026
Media & Entertainment
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Bull & Bear Case
An overview of the main reasons to invest and the key risks involved.
Bull Case
Advertising adds a second income stream
Selling adverts on cheaper plans earns money from brands as well as from viewers.
Local production in over 50 countries
Making shows locally wins audiences that rivals shipping only English-language content cannot reach.
Bear Case
Content spending never stops
Netflix must keep buying and making expensive new shows simply to hold its audience.
Growth depends heavily on price rises
Raising prices to grow revenue risks pushing cost-conscious subscribers towards cheaper rivals.
Advertising money is cyclical and contested
Ad budgets shrink in downturns and Netflix competes with far larger established sellers.
Executive Summary
About Netflix
Netflix charges people a monthly fee to watch films, series, live events and games over the internet, and sells advertising on its cheaper plans. It commissions and produces its own programming in more than 50 countries, and its audience is approaching a billion people, spread across the Americas, Europe, the Middle East, Africa and Asia-Pacific.
The case rests on scale. A very large paying base lets Netflix spend more on programming than most rivals while still widening its profit margin, and advertising gives it a second way to earn from the same viewers. The argument is whether growth increasingly leans on price rises, and whether content costs ever stop climbing.
The case rests on scale. A very large paying base lets Netflix spend more on programming than most rivals while still widening its profit margin, and advertising gives it a second way to earn from the same viewers. The argument is whether growth increasingly leans on price rises, and whether content costs ever stop climbing.
Investment Thesis
Overview of buy and sell case of the business.
Why Invest?
Key pieces of information about the business that you need to know about.
Advertising is still in its early innings
Netflix sells adverts on its cheaper plans, so it earns money from brands as well as from viewers, and it can do that across a paying base spread through almost every country it operates in. Management has guided to roughly doubling advertising revenue to about $3 billion in 2026, and the number of brands buying space has grown about 70% year on year to more than 4,000. The average revenue Netflix collects per member on the ad plan is still well below what it collects on the standard tier, which management describes as underrealised revenue growth in the near term — in other words, money it expects to close the gap on as the ad business matures. To get there it is building its own tools for planning, buying and measuring campaigns, plus automated buying that opens the service to smaller advertisers who previously could not get in.
AI is starting to change what a content budget buys
Generative AI tools have now been used in production workflows on roughly 300 titles, mostly at the post-production stage, where footage is edited and finished rather than filmed. Netflix points to a documentary where AI-enhanced footage was delivered around twice as fast at about half the cost, and says some complex shots would have been dropped from the finished programme altogether without these tools. These savings are early examples rather than a proven pattern, so they should be read as a signal of what is possible, not as a guaranteed cost reduction. Because shows are commissioned and made over long periods, it will take years of spending data before anyone can judge what AI does to Netflix's total content bill.
A content pipeline built on creators who already have audiences
Rather than betting only on speculative new originals, Netflix is signing creators who arrive with followings they have already built elsewhere, on YouTube and in podcasting, among them Sean Evans, Jay Shetty and Martha Stewart. A creator with an established audience lowers the risk of any single commission, because some viewers are likely to turn up for the name whether or not the show becomes a wider hit, so fewer bets depend entirely on a launch catching on. Alongside that, Netflix positions itself as an attractive home for up-and-coming writers and directors, and it commissions programming locally in markets around the world, which keeps a steady supply of new talent and new stories coming through the pipeline.
Catalysts
The key events that could drive investment opportunities and shift markets.
Advertising Ramp: The next stretch is about turning a bigger, more varied slate into more money per member, and the milestones below all point that way. Netflix has guided to roughly doubling its advertising revenue to about $3 billion in 2026, with US annual advertiser commitments being negotiated, which would make brands a meaningful second source of income.
Live Sport Slate: An expanded agreement with the NFL secures American football games including Thanksgiving Eve and Christmas fixtures, alongside boxing and baseball events. Live programming has historically driven some of Netflix's biggest sign-up days, so these dates could pull in new members.
Price Change Flow-Through: Recent price rises in markets including the United States, Mexico and Spain have only partly landed in reported revenue so far. As they work through the full member base over the coming year, they could lift revenue per subscriber without any new signings.
Broadcaster Partnerships: In France, members now get channels and on-demand content from local broadcaster TF1 inside their existing subscription. If the model works, similar tie-ups elsewhere could deepen local appeal without Netflix funding all the programming itself.
AI In Production: Generative AI tools have been used in workflows on roughly 300 titles, mostly in post-production. Netflix points to a documentary where AI-enhanced footage was delivered around twice as fast at about half the cost, and says some complex shots would otherwise have been dropped altogether. Over a number of years this could change what a given content budget buys, though the savings are early examples rather than proven across the slate.
Netflix As A Distribution Platform: In France, members get channels and on-demand content from local broadcaster TF1 inside their existing subscription. If that arrangement works, it could become a template: Netflix carrying other services' content and becoming the place a household manages its viewing, deepening local appeal without funding all the programming itself. This is optionality rather than a stated plan, with no disclosed numbers attached.
Games And Podcasts: Cloud-based TV games and video podcasts are being built out, with monthly active users on cloud gaming reported up around elevenfold in eight months from a small base. Management frames these as a foundation rather than a near-term earner, so any revenue contribution sits years out and is far from certain.
Key Risks
Key pieces of information about the business risks that you need to know about.
Revenue growth is guided to slow
Netflix's own guidance points to revenue growth slowing from here, and with an audience already this large, a growing share of that growth comes from charging existing members more rather than adding new ones. Netflix has raised prices in markets including the United States, Mexico and Spain, and each rise tests how much households will absorb before cancelling, with cheaper rivals and free video platforms competing for the same evenings. Nor can the company simply spend less to protect profits: subscribers pay for what is on the service this month, so programming budgets cannot easily be cut without making the problem worse.
You can no longer see how the audience is really doing
Netflix has stopped reporting subscriber numbers and now steers investors towards revenue and operating margin instead, and it publishes its viewing report once a year rather than alongside earnings. The engagement figures it does give are hard to judge on quality, because total hours viewed say little about whether the shows people watch are the ones keeping them subscribed. That leaves outside investors with less visibility into whether the audience itself is still expanding.
Leadership and succession
Co-founder Reed Hastings is stepping back from the board, which removes a founder's voice from oversight at a time when the company is changing how it makes money, adding advertising, live events and games. This is a governance and continuity question rather than a prediction of anything going wrong. It is a risk to watch rather than a problem that has shown up in the results.
What the Pros are asking
Here are the questions that professional investors are asking before making an investment decision.
How does Netflix actually make money now that adverts are involved?
Netflix makes money two ways. The bulk comes from subscriptions, a monthly fee paid by households on a range of plans at different prices. The second, newer stream is advertising, sold on the cheaper ad-supported plans, where brands pay to reach viewers. The two work together: the advert-carrying plan keeps a low headline price for cost-conscious households, and Netflix earns from the brands instead. Management has said it aims for roughly $3 billion of advertising revenue in 2026.
Netflix stopped reporting subscriber numbers, so how do I judge whether it's growing?
Netflix has shifted investors' attention to revenue and operating margin, which is the share of revenue left as profit after running costs, and it has said it will publish its viewing report annually rather than alongside earnings. In practice you judge growth on revenue by region, on how much of that growth comes from prices versus new members, and on advertising revenue. The trade-off is less visibility into whether the audience itself is still expanding.
Why would anyone keep paying when there are so many other streaming services?
That depends on whether Netflix stays the service households cancel last. Its argument is breadth: a large slate across series, films, animation, documentaries, live sport, video podcasts and games, produced in more than 50 countries so viewers get shows in their own language. More than a third of viewing is non-English content. The risk is real, and it is why programming spending cannot be cut, but breadth is a harder thing for a single-studio rival to match.
What happens to Netflix if it stops producing hit shows?
Revenue would not collapse overnight, because subscriptions are paid monthly and people rarely cancel immediately. Over time, though, weaker programming shows up as slower sign-ups and higher cancellations, and Netflix has little choice but to keep spending to fix it. The company points to patient investment paying off, having started original animation in 2018 and later produced global breakout titles. Hit-making is unpredictable, which is why the scale of the slate matters more than any single show.
Is Netflix using AI to cut its costs, or is that just talk?
Both things are happening, though the savings are early rather than proven. Netflix says generative AI tools have been used in workflows on roughly 300 titles, concentrated in post-production, and that they deliver certain complex sequences faster and more cheaply than traditional methods. In some cases shots would have been dropped without them. It also uses AI in advertising tools and in recommending titles. Judging the effect on total content costs will take years, not quarters.