William Blair on Netflix (NFLX): 'Solid Quarter but Guidance a Bit Light'
William Blair analyst Ralph Schackart reiterated an Outperform rating on Netflix (NASDAQ: NFLX).
The analyst comments "Key takeaways. First, engagement trends point to growth. Netflix disclosed that its platform has reached 325 million paid memberships and is now serving an audience of nearly one billion people globally. According to co-CEO Greg Peters, churn improved year-over-year and customer satisfaction is at an all-time high. In the second half of 2025, view hours increased 2% (up from 1% growth in the first half), driven by a 9% increase in branded original content viewing hours from titles like the final season of Stranger Things and The Reckoning, Sean Combs’ documentary. However, overall engagement trends were impacted by a year-over-year decline in nonbranded content viewing hours as a result of the WGA strike elevating licensing costs of second-run content in most regions from 2023 through 2024. Second, an update on product and AI initiatives. In 2026, the company plans to roll out live voting, moments, more game options via a controller, and new discovery tools to find content. Netflix is also using AI to help with ad campaign planning, to automate workflows, and to help members find their most relevant titles. Third, advertising revenue grew two and half times in 2025. Ad revenue, at the end of 2025, surpassed $1.5 billion, and the company expects it to double in 2026. Alongside using AI to help with ad campaign planning, Netflix is working on building AI tools to help advertisers create custom ads based on Netflix’s intellectual property in 2026."
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Shares of Netflix closed at $87.26 yesterday.