Netflix’s ad ambition depends on keeping viewers watching

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TL;DR:

Netflix’s next growth test is attention, not subscriber scale. Ahead of Q2 earnings, slowing engagement, tougher competition and a still-developing ad business are raising pressure to prove that rising revenue can become durable, high-margin growth.

Article:

Netflix enters its July 16 earnings update with a new problem: revenue is growing, but viewer engagement is under pressure as YouTube, mobile video and traditional media fight for the same hours. The shift matters because its next growth phase depends less on password-sharing gains and price rises, and more on turning attention into recurring advertising revenue.

Analysts polled by LSEG expect revenue to rise 13.6% to $12.59 billion, its slowest growth in more than four quarters. Netflix forecast $12.57 billion, 13.5% growth and a 32.6% operating margin. It also projected about $3 billion in 2026 ad revenue, double 2025.

That ambition now faces an execution test. Emarketer analyst Ross Benes told Reuters, “We had to lower our advertising forecast,” as the ad business grew more slowly than many analysts had expected. Reuters estimated second-quarter advertising revenue at $705.8 million.

Netflix still commands vast usage. Members watched 96 billion hours in the second half of 2025, slightly above the more than 95 billion hours recorded in the first half. The company has called watchtime its “best indicator of member happiness” and said its primary internal quality-engagement metric reached a record in the first quarter.

The risk lies beneath the total. Reuters, citing Bloomberg, said later seasons of The Night Agent and Beef lost roughly half or more of their first-season audiences, while Nielsen measured YouTube at 13.2% of US television watch-time in March and Netflix at 8.2%.

For advertisers and investors, the question is no longer whether Netflix can attract a global audience. It is whether the service can make viewers return often enough to justify premium ad pricing and sustain double-digit growth. The earnings call should be judged on engagement disclosure, ad technology progress and the durability of viewing beyond marquee hits.