Netflix's ad pivot wobble
- Netflix reported growth in its ad‑supported tier but issued weaker guidance for the next quarter. - Paid memberships exceeded 325 million and the ad tier accounted for about 60% of new sign‑ups. - The stock fell roughly 10% after the guidance miss and co‑founder Reed Hastings stepped down from the board. ( ).
Netflix’s push into cheaper, ad-supported streaming kept adding customers, but Wall Street focused on a softer second-quarter outlook and sent the stock down after earnings. (cnbc.com) Netflix reported $12.25 billion in first-quarter revenue on April 16, up 16% from a year earlier and above analyst estimates compiled by LSEG. The company said it expects second-quarter revenue growth of 13%. (cnbc.com) The company entered 2026 with 325 million global paid memberships, and executives had said in January that 2025 advertising revenue topped $1.5 billion and should double in 2026. Netflix’s ad plan has become one of the company’s main growth levers after years of relying almost entirely on subscriptions. (cnbc.com, cnbc.com) Netflix launched its ad tier in November 2022 after subscriber growth slowed and investors pushed streaming companies to show steadier profits. By November 2024, the company said more than 50% of new sign-ups in markets with ads were choosing that cheaper plan. (cnbc.com) That model gives Netflix two ways to make money from one household: a monthly fee from the subscriber and ad sales from marketers. It also gives the company a lower entry price in markets where a full-price plan can be a harder sell. (cnbc.com) The ad business is still small next to Netflix’s total sales. CNBC reported that the company’s 2025 ad revenue of more than $1.5 billion was about 3% of full-year revenue, which helps explain why even solid ad-tier growth did not outweigh investor concern about near-term guidance. (cnbc.com, cnbc.com) Netflix has also been asking more from customers on price. In March, it raised its ad-supported plan to $8.99 a month from $7.99, while standard rose to $19.99 and premium to $26.99. (cnbc.com) The earnings report landed with another change at the top. Reed Hastings, Netflix’s co-founder and current chairman, said he will leave the board in June when his term expires. (cnbc.com) Netflix’s next test is whether ad sales can grow fast enough to offset heavier content costs in the first half of 2026 and justify the company’s higher prices. Investors will get that answer one quarter at a time. (cnbc.com, cnbc.com)
