Netflix may have entered the advertising arena later than many of its media rivals, but recent financial results suggest the strategic pivot is beginning to generate tangible returns.

The company released its fourth-quarter earnings this week, though much of the public attention was diverted by reports surrounding Netflix’s interest in acquiring Warner Bros. Discovery’s streaming and studio operations. Beyond those headlines, however, key indicators such as user engagement, subscriber growth, and advertising income point to a strengthening business outlook.

The earnings announcement offered clearer insight into how Netflix’s advertising initiative is developing and how it fits into the broader corporate strategy. According to the company, advertising revenue in 2025 surpassed $1.5 billion, accounting for roughly 3% of its total annual revenue. Netflix also indicated that this figure is expected to double over the coming year, underscoring management’s confidence in the segment’s growth potential.

Overall performance remained solid. Netflix’s total revenue increased by nearly 16% in 2025, while net income climbed 26%, reflecting both subscriber expansion and improved monetization efforts.

“We’re making solid progress, and the opportunity ahead of us is enormous,” co-CEO Greg Peters said during the company’s investor call on Tuesday.

Not all reactions from Wall Street were uniformly positive. Some analysts noted that the newly disclosed advertising figures came in below earlier expectations, suggesting that scaling the ad business may be taking longer than originally projected.

“The last couple of years were slower out of the gate than we had estimated,” analysts at Deutsche Bank wrote in a research note on Wednesday. “That said, advertising revenue growth is now gaining momentum and should ultimately contribute to overall revenue growth in line with our earlier forecasts.”

Robert Fishman of MoffettNathanson also observed that ad revenue fell short of his firm’s projections, but he welcomed the added transparency. He noted that the disclosure allows investors to better assess how much advertising is contributing to Netflix’s growth and to more accurately estimate the performance of its core subscription business.

Following the earnings release, Netflix shares declined by about 2% on Wednesday.

Across the media industry, advertising has regained prominence as companies have come to terms with the limits of a subscription-only streaming model. As profitability pressures mount, ad-supported options have become an increasingly important part of the equation.

Despite economic uncertainties and shifting marketing budgets, advertisers have shown strong interest in streaming platforms, particularly Netflix, given its scale and global reach. Still, Netflix was notably slow to embrace advertising, having resisted the model for years. The company finally introduced a lower-priced, ad-supported tier in late 2022, a move that coincided with a brief slowdown in subscriber growth.

Alongside advertising, Netflix also tightened rules around password sharing, presenting both initiatives as drivers of renewed expansion. While progress has been gradual, the impact is becoming more visible.

By the end of 2025, Netflix reported 325 million global subscribers, an increase of approximately 23 million compared with the end of 2024, when the company last shared global paid membership figures. For context, Netflix added about 41 million subscribers in 2024 and nearly 30 million in 2023.

As streaming prices continue to rise across the industry, many companies are betting that consumers will choose lower-cost, ad-supported plans rather than cancel subscriptions altogether. That trend appears to be playing out at Netflix as well.

Peters acknowledged that the average revenue per user remains higher for Netflix’s ad-free plans than for its ad-supported tier, but he emphasized that the difference is shrinking. While this gap means the company may be leaving some revenue unrealized in the short term, he described it as a significant long-term opportunity.

By continuing to invest in its technology infrastructure and advertising capabilities, Netflix aims to narrow that gap further and unlock additional growth, signaling that advertising is set to play an increasingly central role in the company’s future.