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Netflix is starting to see tangible results from its strategic pivot into advertising and lower-priced subscriptions, a move aimed at diversifying revenue beyond its traditional subscription-only model. Launched in late 2022, the ad-supported plan is now contributing meaningfully to the company’s overall growth and profitability.

During its fourth-quarter earnings call, Co-CEO Greg Peters described the ad business as “making good progress” and said the opportunity ahead is “massive,” signaling the streaming giant’s confidence in its monetization strategy.

Subscriber Growth Rebounds and Revenue Climbs

Netflix closed 2025 with 325 million global subscribers, up roughly 23 million from the end of 2024. While subscriber growth slowed compared with the 41 million added in 2024, the increase demonstrates that the ad-supported model, combined with measures like cracking down on password sharing, has helped sustain user engagement.

The company’s total revenue jumped nearly 16% in 2025, while net income rose 26%, showing that the business is benefiting not just from scale but also from higher profitability per subscriber. Peters highlighted that the gap between the revenue per user of the standard, no-ads plan and the ad-supported tier is narrowing, presenting further opportunities to capture additional revenue.

Advertising Revenue Surpasses $1.5 Billion

Netflix reported that 2025 advertising revenue exceeded $1.5 billion, approximately 3% of total annual revenue, and expects this figure to double in 2026 as the platform improves ad targeting, expands formats, and reaches a larger global audience.

Wall Street analysts welcomed the transparency, though some noted that ad revenue came in slightly below expectations. Deutsche Bank said, “Advertising revenue growth is hitting its stride and should yield a similar contribution to revenue growth as we had estimated in our pre-4Q forecast.” MoffettNathanson echoed the sentiment, noting that the disclosure allows for a clearer understanding of ad contribution alongside subscription revenue.

Catching Up in the Ad Market

Netflix was a late entrant to the streaming advertising space, with leadership historically resistant to the model. But as subscription-only growth slowed and pressure to sustain profitability increased, the ad-supported plan became a core element of the company’s strategy.

Industry trends show that consumers are increasingly receptive to lower-priced, ad-supported options. Meta, Disney+, and Hulu have all leaned into hybrid monetization models, reinforcing Netflix’s move. The company’s robust content library and global reach make it an attractive platform for advertisers, with tens of millions of users now accessible through ad placements.

Looking Ahead

Netflix’s focus on improving its tech stack and ad capabilities positions it to maximize revenue from the ad-supported tier while retaining high engagement across the platform. Peters emphasized that the company sees “massive opportunity” as ad targeting becomes more precise and as subscriber upgrades from ad-supported to premium plans grow.

The fourth-quarter report also coincided with Netflix’s ongoing pursuit of Warner Bros. Discovery’s streaming and studio assets, highlighting the company’s ambition to expand its content ecosystem and consolidate market leadership.

As the ad-supported tier scales globally and the company optimizes monetization, Netflix is steadily proving that a hybrid revenue model can fuel growth while appealing to a broader spectrum of consumers.

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