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Netflix is “off to a good start in 2025,” the company said in its first-quarter earnings release on Thursday afternoon. Indeed, revenue was up 13%, and operating income up 27%, both ahead of the company’s typically conservative guidance thanks to “slightly higher” subscription and ad revenues, and the timing of expenses.
But it’s Netflix’s still-nascent ad operation that will drive growth going forward, especially if the economic climate in the United States and beyond worsens amid ongoing trade, tariff and other uncertainties.
Tucked into the investor letter that accompanied today’s earnings call was perhaps the most important news affecting growth, the April 1 launch of Netflix’s own in-house ad-tech platform, the latest big step since the company announced after a disastrous earnings call three years ago that it would crack down on password sharing and launch an ad-supported tier.
The password crackdown is largely in place globally now, and credited by analysts for driving the previous quarter’s astonishing addition of 19 million subscribers, taking the company to 301 million total. But Netflix executives said that would be its last quarter to regularly release subscriber adds, preferring to focus on measures of revenue, profit, reach and engagement. Along the way, Netflix has been developing an ad-based tier and the ad-targeting and -serving technologies needed to run it.
That launch, so far, is only in the U.S. and Canada markets, the company’s biggest. Co-CEO Greg Peters said the tech will roll out in 10 more major markets in coming months.
“It was a big milestone to roll out our own ad suite,” Peters said during the earnings call in response to a question. “We’re still in the middle of that. The United States and Canada rollouts have gone well. We’re continuing to operate based on the feedback we’re getting.”
The company started with ad technology from Microsoft, and continues to work with various providers in other markets. Peters said going in-house will give advertisers more flexibility and ease of use, in turn driving more ad sales. Further enhancements are planned to improve programmatic-ad availability, along with enhanced targeting and more data sources. Not incidentally, Peters said it should create a better, more relevant ad experience for viewers on the ad tier.
“We’re just getting started,” Peters said. “We have many years of work ahead of us, but we have a clear road map.”
Mark Douglas, the CEO of Los Angeles-based ad-tech company MNTN, told CNBC before earnings were released that Netflix has said internally that it is targeting $9 billion in advertising revenue by 2030. That’s both a huge jump for Netflix, but far less than the vast sums collected by Google and its YouTube subsidiary, Meta’s social-media outlets, or even Amazon’s e-commerce-fueled ads that were goosed last year when it converted all Prime Video subscribers to an ad-supported tier.
But it represents a hefty jump from Netflix’s first couple of years of ad-supported operations, and will require a big expansion in that low-cost, but highly profitable tier, Douglas said.
“It’s like a backlog of (unrealized) revenue they can tap into” to drive future growth, Douglas said. He likened it to the bonanza of new subscribers the company was able to generate, capped by Q4’s 19 million adds, after it cracked down globally on password sharing.
The company reported $10.5 billion in revenue for the quarter, operating profit of $3.3 billion, and an operating margin of 31.7%, well above annual levels of the past three years. Revenue growth in the U.S./Canada market dropped to 9%, from last quarter’s 15%, but executives attributed some of that to a mismatch on when expenses and programming are arriving. Wall Street generally welcomed the results, sending shares about $1,000, up more than 3%, in after-hours trading.
In the Netflix investor newsletter, the company said “Our ads plan allows us to offer lower price points for consumers while creating an additional revenue and profit stream for our business. We continue to make progress building our ads business. We remain on track to reach sufficient scale with our member base in all ads countries in 2025, and we expect to continue to grow our ads membership from this strong base in the future.”
Once advertising is more fully built out, it should be more lucrative than straight subscription-based tiers, because revenue grows larger as more people watch for longer periods, Douglas said. With subscription-only tiers, more viewership actually costs more to operate in the streaming world, reducing profits.
Peters said he was unsure he’d characterize the ad-tech buildout as “completely solved, but we do have an ambition to achieve the same level of recommendations on the ad side as we provide on the program side. We’re literally just beginning to get that going.”
Targeting based on demographic slices such as a viewer’s “life stage,” interests, or viewing mood are starting to be incorporated into the targeting that brands will be able to choose, with more of that capability available in 2026, and in more countries, with “more measurement functionality,” Peters said.
And though Netflix is not routinely releasing quarterly subscriber adds any more, Douglas said the company has signaled it will note various goalposts. He predicted, when pressed by a CNBC host, that Netflix would crest (and likely announce) that it had 350 million subscribers “within 12 months.”
During an economic downturn, as may be looming amid tariff uncertainty, Netflix executives said they expected the company will be well positioned as perhaps the last entertainment service most subscribers would cut if they had to scrimp.
“Engagement remains strong and healthy,” Peters said. “Things generally look strong from that lens. Entertainment has generally been pretty resilient during tougher times. Netflix has also been resilient, though over a shorter history.”
Meanwhile, though the company is closely watching the burgeoning video-based podcast sector, and already has launch many of its own for marketing and promotion purposes, executives said the company is less concerned about YouTube’s ocean of user-generated shows, than it is about carving a larger portion of viewership from the 80% percent of watch time that neither Netflix or YouTube already command.
“We still have hundreds of millions of folks to sign up,” Peters said. “We believe we have plenty of room to grow our engagement, our revenue, and our profit.”
Indeed, company executives believe they’re pretty good position even if other countries try to levy stout penalties in response to U.S. tariff threats.
Co-CEO Ted Sarandos said Netflix produces content in 50 countries and “is a net contributor to many of those countries,” helping export local stories and cultures around the world and even driving tourism.
“We believe we’re additive to local economies,” Sarandos said. The company has made massive investments in production centers, particularly in the United Kingdom, Mexico, and South Korea.
Four hits released in the quarter broke into various Netflix lists of its all-time most-popular shows, including the harrowing limited series Adolescence, from the United Kingdom, and three features, Jamie Foxx and Cameron Diaz spy thriller Back in Action, French thriller Ad Vitam with Guillaume Canet, and Mexican anti-cartel action film Counterattack.