Executive Summary
Content Strategy & Engagement Metrics
Netflix surpassed 325 million subscribers during 4Q25 and indicated it is on a path toward 1 billion users over time. The company's 2H25 What We Watched Engagement Report demonstrates accelerating momentum in content consumption and viewer engagement.
According to Nielsen's "The Gauge," NFLX's share of US TV time increased 50 basis points year-over-year to approximately 9.0% in December, and the month-over-month gap to YouTube tightened by 90 basis points. Based on third-party data, NFLX also captured share across multiple international markets including the UK, Mexico, and Spain.
While management notes that NFLX's biggest titles generally account for less than 1% of viewing time, Stranger Things Season 5 now ranks #4 among NFLX's all-time English Series debut rankings, and The Great Flood ranks #7 among all-time non-English Films debut rankings.
Live & Sports Strategy Driving Incremental Engagement
NFLX expects its Live/Sports strategy to boost engagement across its large global subscriber base and attract more Ad Tier subscribers, viewers, and advertising dollars. The company is streaming The New York Yankees vs. San Francisco Giants on MLB Opening Night (March 25, 2026) and hosting BTS' first live concert in 3 years on March 21, 2026.
First quarter content includes Bridgerton Season 4, Love is Blind Season 10, ONE PIECE Season 2, Peaky Blinders: The Immortal Man, The Lincoln Lawyer Season 4, The Night Agent Season 3, and Virgin River Season 7.
Advertising Business Transformation
The advertising business represents a significant growth opportunity with ad revenue increasing more than 2.5x in 2025 to reach $1.5B+. NFLX expects ad revenue to roughly double again in 2026, with greater focus on monetization including expanding inventory and improving fill rates.
"We're making more first-party data accessible for advertisers, leveraging AI to customize ads and automate workflows, and expanding ad formats including modular capabilities for interactive video ads rolling out globally by 2Q26."
NFLX has indicated that Programmatic is roughly half the ad business currently and will account for the bulk of ad dollars over time. The Ad Tier remains dilutive to overall Average Revenue per Member (ARM), though the gap is narrowing as the business scales and monetization improves.
Key initiatives include improving measurement and targeting capabilities, developing advanced ad solutions such as modular and interactive formats, and enhancing go-to-market and sales processes to better serve advertisers.
2026 Financial Outlook
NFLX guided to 2026 revenue growth of 12-14% on a reported basis (11-13% FX-neutral), with key drivers including membership growth, pricing, and advertising. In terms of pricing strategy in 2026, NFLX indicated that there would be no change to how it has historically run the business.
NFLX also emphasized its organic growth opportunity, noting that NFLX's share of TV time remains less than 10% in all major markets, suggesting substantial room for continued expansion.
Operating Margin Expansion
NFLX's 2026 operating margin guide of 31.5% reflects 150 basis points year-over-year expansion when adjusting for Brazil tax catch-up in 2025 and approximately $275 million of deal-related expenses in 2026.
Content investments are the primary driver of 2026 expenses, though NFLX is also spending across technology & development and sales & marketing. The company anticipates a approximately 1.1x cash content to amortization ratio in 2026, with key investment areas including originals, licensed deals, Live/Events, and new formats including Video Podcasts.
Free Cash Flow & Capital Allocation
NFLX's 2026 free cash flow guide of approximately $11 billion includes $700 million payout on Brazilian tax that shifted from 2025 to 2026. The guidance embeds 2026 content amortization growth of 10% versus 7% year-over-year in 2025, with higher growth in 1H26 due to smoother content timing this year and lighter content spend in 1H25.
NFLX has temporarily paused its share repurchase program but remains committed to it over time, balancing capital returns with strategic investments in content and technology.
Market Share Analysis
Streaming continues to capture share from traditional Cable and Broadcast television. Nielsen's "The Gauge" estimates that streaming's share of overall US Total Usage of Television increased 420 basis points year-over-year in December to 47.5%, ahead of Cable at 20.2% and Broadcast at 21.4%.
| Platform | Share of TUT | YoY Change |
|---|---|---|
| YouTube | 12.7% | — |
| Netflix | 9.0% | +50bps |
| Disney+ | 4.7% | — |
| Prime Video | 4.3% | — |
| Cable | 20.2% | — |
| Broadcast | 21.4% | — |
| Total Streaming | 47.5% | +420bps |
In international markets, NFLX continues to demonstrate leadership. The UK's Broadcasters' Audience Research Board (BARB) estimates NFLX has 11.1% share of UK TV Time, up 80 basis points year-over-year, significantly above Disney+ at 3.7% and Amazon at 3.3%.
Similar trends are evident across other key markets including Mexico, Spain, Poland, and Brazil, where NFLX maintains strong competitive positioning despite streaming's share of total TV time remaining below 40% in these markets, suggesting continued growth runway.
DAU & Downloads Trends
According to Sensor Tower data, global Daily Active Users (DAU) trends show 1QTD Global DAUs at -3% year-over-year, stable versus 4Q but softer compared to December's -1% year-over-year. Year-over-year comparisons have become less favorable, though absolute global DAU data has increased versus December.
Regional DAU performance varies with APAC showing the strongest momentum at +2% year-over-year in 1QTD, representing acceleration from 4Q and December both at +1% year-over-year. UCAN improved to +1% year-over-year versus -2% in 4Q.
| Region | 4Q25 | December 2025 | January 2026 |
|---|---|---|---|
| GLOBAL | -3% | -1% | -3% |
| UCAN | -2% | +3% | +1% |
| APAC | +1% | +1% | +2% |
| EMEA | -5% | -2% | -6% |
| LATAM | -5% | -4% | -8% |
Global Downloads show 1QTD at -17% year-over-year, softer versus 4Q and December both at -11% year-over-year. While year-over-year comparisons have become less favorable, this reflects tougher comparisons rather than fundamental deterioration in the business.
Investment Conclusion
Netflix's 4Q25 results and 2026 guidance demonstrate the company's continued ability to drive sustainable growth through a balanced approach to pricing, content investment, and product innovation. The 12-14% revenue growth guidance reflects confidence in membership expansion, disciplined pricing, and the emerging contribution from advertising.
The 31.5% operating margin target for 2026, representing 200 basis points of expansion year-over-year, underscores management's ability to scale the business efficiently while making strategic investments in content, technology, and advertising capabilities. The approximate $11 billion free cash flow guide provides substantial financial flexibility for content investment and potential capital returns.
Key areas to monitor include the timing and magnitude of US and international price increases, advertising monetization progress as the business scales toward doubling revenue in 2026, content engagement trends particularly around Live/Sports initiatives, and the company's ability to maintain share of TV time gains across major markets. With NFLX's share of TV time remaining below 10% in all major markets, the company retains significant organic growth runway in its core streaming business.
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