Netflix reported fourth quarter 2025 financial results on January 20, 2026, demonstrating accelerating momentum across subscription growth, advertising expansion, and content engagement, while simultaneously advancing its pending Warner Bros. acquisition valued at $27.75 per share. The streaming platform crossed 325 million paid memberships during the quarter ended December 31, 2025, according to the shareholder letter.

The company delivered $12.05 billion in revenue for the fourth quarter, representing 18% growth compared to the same period in 2024. Operating income reached $2.96 billion, up 30% year-over-year, while operating margin expanded two percentage points to 25%. These results exceeded Netflix's own guidance due to stronger-than-forecasted membership growth and advertising sales performance.

For the full year 2025, Netflix achieved $45.2 billion in revenue, marking 16% growth on a reported basis and 17% on a foreign exchange-neutral basis. The company expanded its operating margin to 29.5%, up three percentage points from 26.7% in 2024. Diluted earnings per share amounted to $0.56 in the fourth quarter versus $0.43 in the prior year period, adjusted for the 10-for-1 stock split effected November 14, 2025.

Advertising revenue trajectory approaches $3 billion target

Netflix's advertising business recorded its third consecutive year of more than 2.5x revenue growth in 2025, surpassing $1.5 billion in total advertising revenue. The company expanded programmatic advertising capabilities throughout the year, completing the rollout of the Netflix Ads Suite proprietary technology platform across all advertising markets during the second quarter.

Co-CEO Greg Peters confirmed during the earnings interview that advertising revenue is projected to roughly double again in 2026 to approximately $3 billion. This growth trajectory follows systematic expansion of programmatic partnerships throughout 2025, including integrations with The Trade Desk, Google Display & Video 360, Microsoft, Yahoo DSP, and Amazon DSP.

The company implemented advanced targeting capabilities across Europe, Middle East, and Africa markets during 2025, introducing mood-based audience segmentation and postal code-level geographic precision. These sophisticated targeting methodologies enable advertisers to reach audiences based on content consumption patterns and emotional engagement states beyond traditional demographic parameters.

According to CFO Spence Neumann during the earnings interview, the gap between advertising-supported tier average revenue per membership and standard ad-free plan pricing continues narrowing. "As we improve our ads capabilities, we can close that gap over time. We can drive more revenue," Neumann stated, noting that increased fill rates have driven advertising ARM higher throughout the past year.

Netflix reported record advertising sales performance in the third quarter, with the company more than doubling upfront commitments in the United States compared to the previous year. Peters highlighted during the Q3 2025 earnings call that programmatic advertising experienced even higher growth rates than upfront sales, demonstrating advertiser enthusiasm for automated buying capabilities.

Content engagement shows bifurcated performance

View hours increased 2% year-over-year in the second half of 2025, reaching 96 billion hours according to Netflix's bi-annual Engagement Report released with the shareholder letter. This represented 1.5 billion additional hours of viewing compared to the same period in 2024, with engagement driven primarily by branded originals.

Viewing of Netflix originals rose 9% year-over-year in the second half of 2025, representing roughly half of overall viewing. This growth was partially offset by decreased viewing of licensed, second-run content across most regions. According to the shareholder letter, the decline in licensed content viewing primarily reflected reduced volume following an elevated period of licensing during 2023-2024 resulting from the Writers Guild of America strike.

The final season of Stranger Things recorded 120 million views through January 18, 2026, according to data provided in the shareholder letter. Other significant fourth quarter releases included Guillermo del Toro's Frankenstein with 102 million views, Wake Up Dead Man: A Knives Out Mystery with 66 million views, and Nobody Wants This Season 2 with 31 million views.

Live programming demonstrated outsized impact relative to total view hours. The Jake Paul versus Anthony Joshua fight generated 33 million average minute audience, while NFL Christmas Day games drove disproportionate excitement and signups despite representing a small proportion of total viewing. Co-CEO Ted Sarandos emphasized during the earnings interview that "big live events like Anthony Joshua's sixth round knockout of Jake Paul and NFL Christmas Day drive disproportionate excitement and signups."

Netflix announced expansion of live event programming for 2026, including exclusive coverage of the World Baseball Classic in Japan streaming all 47 games live and on demand. The company also revealed plans for Star Search with live fan voting, Skyscraper Live, and three Major League Baseball events including an exclusive Opening Night game and the Home Run Derby.

Licensed content agreements expand content library

Netflix significantly expanded its licensing portfolio during 2025, establishing several major content partnerships. The company announced a new licensing partnership with Universal Pictures for live action films in the United States, complementing existing agreements for animated films from Illumination and DreamWorks Animation studios.

The streaming platform licensed approximately 20 shows from Paramount including Matlock and King of Queens for international territories, plus Seal Team, Watson, and Mayor of Kingstown for both United States and international markets. According to the shareholder letter, Netflix "recently announced we expanded our pay 1 film pact with Sony Pictures Entertainment from a US to a global deal."

This Sony partnership marks the first time a distribution service will premiere theatrical films in the pay 1 window simultaneously on a global basis. Netflix's footprint will expand each year as Sony's regional deals expire, with full global availability expected in early 2029.

The company also launched video podcasts during the fourth quarter, introducing programming from partnerships with Spotify/The Ringer, iHeartMedia, and Barstool Sports. New original podcasts were announced featuring comedian Pete Davidson and NFL legend Michael Irvin.

Gaming strategy pivots to cloud-first approach

Netflix launched cloud-delivered television-based party games during the fourth quarter to roughly one-third of its member base. The initial slate included Boggle, Pictionary, Lego Party, and Tetris, with Peters reporting "early results are encouraging" during the earnings interview.

The company announced expansion of its cloud games lineup for 2026, including a newly reimagined FIFA football simulation game. This cloud-first strategy makes television games more accessible by eliminating device-specific technical requirements and allowing members to use phones as controllers.

Peters emphasized that gaming investment follows a disciplined approach based on demonstrated member value. "We've got a solid track record of doing that in our core content category, so we're going to continue to grow there. We're also increasingly confident about our ability to do that in ads and live, where the 200 live events that Ted mentioned indicates that we should ramp and grow in those areas," Peters stated during the earnings interview.

Warner Bros. acquisition advances toward regulatory approval

Netflix and Warner Bros. Discovery amended their merger agreement January 20, 2026, converting the transaction to an all-cash structure valued at $27.75 per Warner Bros. Discovery share. The revised agreement replaces the previous cash-and-stock combination announced in December 2025.

According to the shareholder letter, the all-cash transaction "expedites the timeline to a WBD shareholder vote and provides greater certainty of value that will be delivered at closing." Netflix obtained increased bridge facility commitments of $8.2 billion on January 19, 2026, bringing aggregate bridge facility commitments to $42.2 billion to support the revised transaction structure.

The company anticipates reducing bridge facility commitments between now and closing through a combination of future bond offerings and cash accumulation on its balance sheet. Netflix established a $5 billion senior unsecured revolving credit facility and a $20 billion senior unsecured delayed draw term loan facility on December 19, 2025, reducing outstanding bridge facility commitments by a corresponding amount.

Sarandos emphasized during the earnings interview that the acquisition has secured progress toward necessary regulatory approvals, with submissions filed to the U.S. Department of Justice and European Commission. "We're confident we're going to be able to secure all the approvals because this deal is pro-consumer. It is pro-innovation. It's pro-worker. It is pro-creator. And it is pro-growth," Sarandos stated.

The transaction provides Netflix with Warner Bros.' film and television studios, HBO Max, and HBO. According to the shareholder letter, the acquisition "will allow us to accelerate our business strategy" through two main opportunity areas: Warner Bros.' library, development, and intellectual property enabling broader content selection, and HBO Max addition allowing more personalized subscription options.

Netflix estimates that on a pro forma post-close basis, approximately 85% of combined company revenues derive from its core streaming business. The remaining 15% represents Warner Bros.' complementary television and film studio operations, which generated more than $4 billion in global box office revenue during 2024 according to Warner Bros. Discovery financial disclosures.

Sarandos explained during the earnings interview that Netflix will maintain Warner Bros.' existing theatrical distribution business with a 45-day theatrical window. "Warner Bros. films are going to be released in theaters with a 45-day window, just like they are today. This is a new business for us and one that we're really excited about," Sarandos stated.

The acquisition includes HBO's prestige brand, which Peters described as meaning "prestige TV better than almost anything. Customers know it. They love it." Peters emphasized that owning HBO will enable Netflix to "further evolve our plan structure, allows us to deliver more series, more film, more value to consumers."

Financial performance exceeds guidance across metrics

Netflix generated $10.1 billion in net cash from operating activities during 2025, producing $9.5 billion in free cash flow compared to $7.4 billion and $6.9 billion respectively in 2024. The company surpassed its $9 billion free cash flow forecast as an expected $700 million deposit related to ongoing disputes with Brazilian tax authorities shifted from 2025 to 2026.

For 2026, Netflix forecasts free cash flow of approximately $11 billion, assuming no material foreign exchange swings. This projection incorporates a cash content spend to content amortization ratio of approximately 1.1x, consistent with the disciplined spending approach maintained throughout recent years.

The company repurchased 18.9 million shares during the fourth quarter for $2.1 billion, leaving $8.0 billion remaining under its existing share repurchase authorization. Netflix announced it will pause share buybacks to accumulate cash supporting the Warner Bros. acquisition, while remaining committed to maintaining a solid investment grade credit rating.

Netflix ended the quarter with gross debt of $14.5 billion and cash and cash equivalents of $9.0 billion. Net income in the fourth quarter included approximately $60 million of costs booked in interest expense related to the Warner Bros.-related bridge loan and associated bridge reduction financings.

Guidance projects sustained double-digit growth

Netflix forecasts 2026 revenue between $50.7 billion and $51.7 billion based on foreign exchange rates as of January 1, 2026. This represents 12%-14% year-over-year growth, or 11%-13% on a foreign exchange-neutral basis, driven by membership increases, pricing adjustments, and the projected doubling of advertising revenue.

The company targets a 2026 operating margin of 31.5%, up from 29.5% in 2025. This forecast includes approximately $275 million of Warner Bros. acquisition-related expenses. Excluding acquisition costs, Netflix projects margin expansion of approximately 2.5 percentage points, consistent with historical performance.

According to the shareholder letter, content amortization growth of approximately 10% in 2026 will be higher in the first half than the second half due to title launch timing. "As a result, we expect higher operating income growth in the second half of 2026 than in the first half," the shareholder letter stated.

For the first quarter of 2026, Netflix forecasts revenue of $12.2 billion representing 15.3% year-over-year growth, with operating income of $3.9 billion and operating margin of 32.1%. Diluted earnings per share are projected at $0.76 compared to $0.66 in the first quarter of 2025.

Regional performance shows consistent growth

United States and Canada revenue grew 18% year-over-year to $5.34 billion in the fourth quarter, maintaining consistent growth rates throughout 2025. Europe, Middle East, and Africa revenue increased 18% to $3.87 billion, or 15% on a foreign exchange-neutral basis.

Latin America demonstrated the strongest regional growth with revenue rising 15% year-over-year to $1.42 billion, representing 20% growth on a foreign exchange-neutral basis. Asia-Pacific revenue grew 17% to $1.42 billion, or 19% on a foreign exchange-neutral basis.

Peters noted during the earnings interview that Netflix remains below 10% of television time in all major markets where it competes. According to Nielsen data cited in the shareholder letter, Netflix captured 9.0% of United States television time in December 2025, representing an all-time high and 0.5 percentage point increase year-over-year.

"Despite our success over the years, our share of TV time remains below 10% in the major markets in which we operate," the shareholder letter stated. "For example, according to Nielsen, in December, our share of US TV time reached an all-time high of 9.0% (+0.5 points year over year), yet linear TV still comprises over 40% of US TV screen time."

Competitive positioning emphasizes content quality

Netflix executives emphasized during the earnings interview that the entertainment business remains intensely competitive with traditional media conglomerates, large technology companies, and local broadcasters competing for consumer attention and advertising revenue.

Sarandos highlighted evolving competitive dynamics, noting that "YouTube has just surpassed BBC in monthly average audience, according to Barb, that publishes these figures in the U.K." He emphasized that YouTube has expanded beyond user-generated content to include full-length films, scripted television shows, and live sports including NFL games and the Oscars beginning in 2029.

The shareholder letter noted that traditional competitive lines continue blurring, with services placing content on both linear channels and streaming services simultaneously. "A number of services place content on both their linear channels and streaming services at the same time. For example, the Golden Globes were available simultaneously on CBS and Paramount+, while last year's Super Bowl was simulcast on Fox and Tubi," the letter stated.

Peters addressed engagement metrics during the earnings interview, explaining that total view hours represent only one measure of business health. "We really care about the quality of that engagement," Peters stated, noting that Netflix achieved an all-time high for its primary quality metric in 2025.

The company reported customer satisfaction at an all-time high, with retention among the best in the industry. Churn improved year-over-year in the fourth quarter, while member growth remained strong, demonstrating what Peters characterized as "the complete understanding of value delivered because it's really what translates best and directly to revenue growth."

Timeline

Summary

Who: Netflix Inc., led by Co-CEOs Ted Sarandos and Greg Peters alongside CFO Spence Neumann, reported fourth quarter 2025 financial results while advancing its acquisition of Warner Bros. Studios, HBO Max, and HBO from Warner Bros. Discovery.

What: The streaming platform achieved $12.05 billion in quarterly revenue (18% year-over-year growth), crossed 325 million paid memberships, expanded operating margin to 25% in Q4 and 29.5% for full year 2025, and grew advertising revenue more than 2.5x to surpass $1.5 billion annually. The company amended its Warner Bros. acquisition to an all-cash transaction valued at $27.75 per share, projects 2026 revenue of $50.7-$51.7 billion with advertising revenue expected to double to approximately $3 billion, and expanded content offerings through licensing partnerships with Universal Pictures, Paramount, and Sony Pictures Entertainment while launching cloud-based gaming and video podcasts.

When: Fourth quarter results cover the period ended December 31, 2025, with the shareholder letter and earnings interview released January 20, 2026. The Warner Bros. merger agreement amendment converting the deal to all-cash structure was announced January 20, 2026, following increased bridge facility commitments obtained January 19, 2026. Netflix projects mid-2026 completion of the Warner Bros. acquisition pending regulatory approvals.

Where: Netflix operates across United States and Canada (UCAN) generating $5.34 billion quarterly revenue, Europe, Middle East, and Africa (EMEA) producing $3.87 billion, Latin America (LATAM) contributing $1.42 billion, and Asia-Pacific (APAC) adding $1.42 billion in the fourth quarter. The company serves over 325 million paid memberships globally approaching one billion people, competing for television viewing time where it captured 9.0% of United States TV time in December 2025 according to Nielsen while linear television still comprises over 40% of viewing.

Why: Netflix's fourth quarter performance and Warner Bros. acquisition strategy matter for the marketing community because the streaming platform's advertising business growth trajectory from $1.5 billion in 2025 to projected $3 billion in 2026 represents substantial premium video inventory expansion at a time when programmatic advertising investment continues accelerating. The company's completion of proprietary Netflix Ads Suite technology deployment, expansion of advanced targeting capabilities including mood-based segmentation and postal code precision, and integration with major demand-side platforms creates sophisticated advertising infrastructure rivaling established digital advertising platforms. The Warner Bros. acquisition adds HBO's prestige brand, extensive content library, and theatrical distribution capabilities, positioning the combined entity to capture larger shares of both subscription revenue and advertising budgets as traditional television viewership continues declining. These developments occur as Connected TV advertising spending approaches $33 billion in 2025 with projections showing CTV's share of media budgets doubling from 14% in 2023 to 28% in 2025, making Netflix's advertising expansion and content strategy central to understanding evolving video advertising market dynamics.

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