Netflix yesterday reported first-quarter 2026 financial results that pushed revenue to $12.25 billion, a 16% increase compared to the same period last year. The shareholder letter, dated April 16, 2026, also confirmed that the company'sadvertising business remains on course to reach approximately $3 billion in annual revenue - doubling year over year - following years of accelerating expansion in programmatic advertising and ad-supported subscriber growth.

The results matter directly to the marketing community. Netflix has spent the past three years building an ad-supported tier and layering in programmatic capabilities that now reach more than 4,000 advertisers, up 70% year over year. For agencies, brands, and media buyers tracking where audiences are migrating and where premium streaming inventory is heading, the Q1 2026 numbers offer a detailed look at the pace of that transformation.

Revenue and operating income

According to the shareholder letter, Q1 2026 revenue of $12,249,757 thousand was driven primarily by membership growth, higher pricing, and increased ad revenue. On a foreign exchange-neutral basis, growth was 14%, reflecting currency headwinds absorbed partly through the company's hedging programme.

Operating income came in at $3,957 million, up 18% year over year, with an operating margin of 32.3%. That compares to 31.7% in Q1 2025. The company's F/X-neutral operating margin was 32.2% for the quarter - just one tenth of a percentage point below the reported figure - indicating foreign exchange had a limited distorting effect on profitability this period.

Cost of revenues in Q1 2026 reached $5,888,238 thousand, compared to $5,263,147 thousand in Q1 2025. Sales and marketing spending rose to $842,217 thousand from $688,370 thousand in the year-ago quarter. Technology and development spending increased to $959,696 thousand from $822,823 thousand. General and administrative costs rose to $602,609 thousand, up from $421,462 thousand in Q1 2025 - a jump partly attributable to M&A-related expenses connected to the terminated Warner Bros. transaction and the InterPositive acquisition.

Net income for the quarter reached $5,282,791 thousand. That figure was substantially elevated by the $2.8 billion termination fee received from Warner Bros., which was recognised in "interest and other income." Diluted earnings per share amounted to $1.23, compared to $0.66 in Q1 2025 - an 86% increase year over year. The company's guidance had projected diluted EPS of $0.76 for the quarter.

Balance sheet and cash flow

According to the financial statements, cash and cash equivalents at the end of Q1 2026 stood at $12,259,772 thousand, up sharply from $9,033,681 thousand at the close of Q4 2025. Total assets increased to $61,015,914 thousand from $55,596,993 thousand at December 31, 2025.

Free cash flow - defined as net cash from operating activities less purchases of property and equipment - reached $5,094,075 thousand in Q1 2026, compared to $2,660,922 thousand in Q1 2025. The shareholder letter attributed much of this increase to the $2.8 billion Warner Bros. termination fee cash receipt. Operating cash flow totalled $5,290,205 thousand versus $2,789,199 thousand in the prior-year period.

The company ended the quarter with gross debt of $14.4 billion and noted that its cash position is higher than normal. According to the shareholder letter, the elevated cash balance reflects a pause in the share repurchase programme during the Warner Bros. transaction and the subsequent receipt of the deal termination fee. Stock repurchases in Q1 2026 amounted to $1,270,588 thousand - substantially lower than the $3,536,396 thousand spent on buybacks in Q1 2025.

Content assets, net on the balance sheet reached $33,376,295 thousand as of March 31, 2026, up from $32,778,392 thousand at year-end 2025. Additions to content assets in Q1 2026 totalled $4,846,917 thousand, compared to $3,549,657 thousand in Q1 2025 - a 36% increase. Amortisation of content assets for the quarter was $4,217,900 thousand.

The full-year 2026 free cash flow outlook has been revised upward to approximately $12.5 billion, up from the prior projection of $11 billion, primarily due to the after-tax impact of the Warner Bros. termination fee. The company expects an annual cash content spend to amortisation ratio of approximately 1.1x.

The advertising business in detail

The ad-supported tier continued to grow as a share of new sign-ups. According to the shareholder letter, the ads plan - priced at $8.99 in the United States - represented over 60% of all Q1 sign-ups within advertising countries. Netflix now works with over 4,000 advertisers, up 70% year over year.

The company reiterated its target of approximately $3 billion in advertising revenue for 2026 - roughly doubling year over year. For context, Netflix's advertising business surpassed $1.5 billion in annual revenue in 2025, recording its third consecutive year of more than 2.5x revenue growth.

Programmatic advertising is becoming a larger part of the inventory mix. According to the earnings call transcript, programmatic ad buying is "on its way to becoming more than 50% of our non-live ads business." This marks a significant structural shift in how Netflix inventory is transacted. The platform had built its programmatic infrastructure incrementally since 2024, starting with The Trade Desk, Google DV360, and Magnite, and later adding Yahoo DSP in June 2025. In March 2026, Netflix further expanded its ad stack by adding Amazon DSP audience targeting, Yahoo DSP deterministic signals, and a proprietary Conversion API for the Netflix Ads Suite.

The earnings call also noted that plans are in place to launch new products throughout 2026 to help advertisers assess the incrementality of their buys on Netflix, all verified by Netflix's first-party data. The shareholder letter cited "improved capabilities" as a driver for attracting new advertising clients. Executives on the call stated that "Nielsen Gauge is not the currency for the video marketplace," indicating the company continues to push alternative measurement frameworks that emphasise its own data.

Throughout the quarter, Netflix continued expanding programmatic targeting options across EMEA and other markets, building on the rollout of its Netflix Ads Suite proprietary technology, which was deployed across all advertising markets in 2025.

Regional revenue breakdown

The Regional Information sheet from the financial filing provides a precise view of where Q1 2026 revenue growth occurred.

United States and Canada (UCAN) generated $5,245,298 thousand in Q1 2026, up 14% from $4,617,098 thousand in Q1 2025. On a constant-currency basis, growth was also 14%.

Europe, Middle East, and Africa (EMEA) produced $3,998,419 thousand, up 17% from $3,404,676 thousand. However, EMEA faces significant foreign exchange pressure - the constant-currency revenue figure for the region, adjusting for FX movements and hedging, was $3,693,199 thousand, representing 12% constant-currency growth rather than the 17% reported growth rate. The divergence illustrates how a strengthening US dollar reduces reported revenue from euro-denominated markets even when underlying subscriber and pricing trends are positive.

Latin America (LATAM) recorded $1,497,058 thousand, a 19% increase from $1,261,934 thousand in Q1 2025. Constant-currency LATAM revenue was $1,467,832 thousand - 18% growth - indicating currency effects were modest compared to EMEA.

Asia-Pacific (APAC) reached $1,508,982 thousand, a 20% increase from $1,259,093 thousand. Constant-currency APAC growth was 19%. The earnings call transcript described APAC as the strongest FX-neutral revenue growth region, supported by successes in Japan, India, Korea, and Southeast Asia.

The shareholder letter highlighted Japan specifically: the World Baseball Classic, described as the company's first regional live event exclusively for Japanese members, delivered 31.4 million viewers, making it the most-watched programme ever on Netflix in Japan and generating the largest single day of sign-ups in the country's history. Japan was cited as the largest contributor to member growth in Q1 globally.

Content spending and slate

Additions to content assets rose substantially quarter over quarter. The company spent $4,846,917 thousand on content in Q1 2026, versus $3,549,657 thousand in Q1 2025. Amortisation of content assets came in at $4,217,900 thousand, meaning the cash content spend-to-amortisation ratio was approximately 1.15x in Q1 - above the full-year target of 1.1x and consistent with the company's disclosure that content amortisation growth would be front-loaded in 2026.

The shareholder letter stated that content amortisation growth will be highest in Q2 before decelerating to mid-to-high single-digit growth in the second half of the year. As a result, Q2 operating margin is forecast at 32.6%, compared to 34.1% in Q2 2025. The company expects year-over-year operating margin growth in Q3 and Q4 to achieve its full-year margin target of 31.5%.

Notable Q1 content included Bridgerton S4, which generated 94 million views in its first 91 days, and One Piece S2, which drew 40 million views. The company aired more than 70 live events during the quarter. The BTS Comeback Live on March 21 reached 18.4 million global viewers and ranked in the weekly Top 10 in 80 countries.

Technology: GenAI and mobile redesign

Netflix disclosed in the shareholder letter that it acquired InterPositive in March 2026 - a filmmaking technology company founded by Ben Affleck that develops AI-powered tools built by and for filmmakers. According to the earnings call, the acquisition "accelerates our GenAI capability" with tools built specifically for content creators. CFO Spencer Neumann noted that M&A-related expenses, including InterPositive and Warner Bros.-related costs, remain "still in the ballpark" of the original $275 million forecast with "no material impact" on the operating margin outlook.

The company also announced a redesigned mobile experience launching at the end of April 2026, including a vertical video discovery feed. The shareholder letter described this as a reflection of the expanding entertainment offering and an effort to make it easier for members to engage across contexts and devices. About 50% of kids' profiles view content on mobile devices and tablets, according to the letter.

The company also launched Netflix Playground - a new standalone gaming app for kids - earlier in April 2026 in the US, Canada, UK, Australia, the Philippines, and New Zealand, with a full global launch planned for April 28. The consumer gaming market opportunity was cited in the earnings call at "$150 billion in consumer spend ex-China, ex-Russia."

Full-year 2026 guidance unchanged

The company maintained its 2026 full-year revenue guidance of $50.7 billion to $51.7 billion, representing 12% to 14% year-over-year growth (11% to 13% on a FX-neutral basis). The operating margin target of 31.5% for 2026 was also reaffirmed, based on FX rates as of January 1, 2026.

Q2 2026 revenue is forecast at $12,574 million, representing approximately 13% year-over-year growth (12% FX-neutral). Operating income guidance for Q2 is $4,105 million at a 32.6% margin. Net income is projected at $3,327 million, with diluted EPS of $0.78. Shares on a fully diluted basis are projected at 4,298 million.

The company also reiterated that 2026 advertising revenue is expected to approximately double from the approximately $1.5 billion recorded in 2025 - reaching the $3 billion target that has been a core part of Netflix's public financial roadmap since at least Q4 2024.

Reed Hastings departure from board

The earnings call transcript noted that Reed Hastings - Netflix co-founder and former CEO - will not stand for re-election as board chair at the company's upcoming annual meeting. The governance transition attracted attention as a marker of a generational shift in the company's leadership structure, with Co-CEOs Ted Sarandos and Gregory Peters now firmly established in operating leadership. Peters and Sarandos participated in the April 16 earnings call alongside CFO Spencer Neumann and VP of Investor Relations Spencer Wong.

Price changes: Spain and broader strategy

The shareholder letter noted that recent price changes "have gone well, reflecting the strong and increasing value" provided to members. The company confirmed today that it announced price adjustments in Spain. This follows a broader pattern of plan-and-price adjustments across markets. The European pricing strategy has been a key instrument for pushing subscribers toward ad-supported tiers, where narrowing the price differential between ad-free and ad-supported plans increases inventory supply for advertisers.

The shareholder letter also cited partnerships with Mercado Libre in Mexico and Brazil as examples of new distribution channels - bundling Netflix with e-commerce loyalty programmes to deepen penetration.

Timeline

  • May 2024 - Netflix opens ad inventory to The Trade Desk, Google DV360, and Magnite as programmatic partners. ppc.land
  • June 16, 2025 - Netflix adds Yahoo DSP as its fourth global programmatic advertising partner. ppc.land
  • July 1, 2025 - Netflix launches advanced targeting suite for EMEA programmatic advertising. ppc.land
  • July 17-18, 2025 - Netflix Q2 2025 earnings call; company declares ads business will "roughly double." ppc.land
  • October 21-22, 2025 - Netflix reports Q3 2025 revenue of $11.51 billion; advertising records strongest quarterly sales in company history. ppc.land
  • November 14, 2025 - Netflix effects a 10-for-1 forward stock split.
  • January 7, 2026 - Yahoo DSP embeds AI agents for automated campaign management, including integration with Netflix inventory. ppc.land
  • January 20, 2026 - Netflix reports Q4 2025 results: $12.05 billion quarterly revenue, 325 million paid memberships, advertising revenue above $1.5 billion annually. ppc.land
  • March 4-6, 2026 - Netflix announces expanded Amazon DSP audience targeting, Yahoo DSP deterministic signals, and a proprietary Conversion API for the Netflix Ads Suite. ppc.land
  • March 2026 - Netflix acquires InterPositive, the Ben Affleck-founded filmmaking AI tools company.
  • April 16, 2026 - Netflix releases Q1 2026 shareholder letter and holds earnings call; revenue reaches $12.25 billion, up 16% year over year; programmatic buying approaching 50% of non-live ad inventory; 4,000+ advertisers on platform, up 70% year over year; full-year guidance of $50.7B-$51.7B and 31.5% operating margin maintained.

Summary

Who: Netflix, Inc., led by Co-CEOs Ted Sarandos and Gregory Peters, and CFO Spencer Neumann.

What: Netflix reported first-quarter 2026 financial results showing revenue of $12,249,757 thousand - a 16% year-over-year increase - with operating income of $3,957 million (32.3% margin), net income of $5,282,791 thousand (boosted by a $2.8 billion Warner Bros. termination fee), free cash flow of $5,094,075 thousand, and advertising revenue on track to approximately double to $3 billion in 2026. The company confirmed programmatic buying is approaching 50% of non-live ad inventory and that it now works with over 4,000 advertisers.

When: The shareholder letter was dated April 16, 2026. The earnings call was held April 16, 2026, at 4:45 p.m. ET. The financial period covered is the three months ended March 31, 2026.

Where: Netflix operates across 190+ countries. Results by region show UCAN at $5.25 billion, EMEA at $3.99 billion, LATAM at $1.50 billion, and APAC at $1.51 billion. Advertising market results are specific to the 13 countries where the ad-supported tier is active.

Why: The results are significant for the advertising and marketing industry because they confirm the trajectory of Netflix's shift from a subscription-only model to a hybrid subscription and advertising platform. With programmatic inventory approaching majority share of non-live ad transactions, advertiser counts growing 70% year over year, and the full proprietary Netflix Ads Suite now deployed globally, the platform is maturing into a scaled programmatic channel competing directly with linear television and other digital video formats.

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