After downgrading Netflix from “buy” to “neutral” in July, Seaport Research Partners reversed course on the streaming company this week, increasing the its price target to $1,385 a share from $1,230, while restoring Netflix to “buy” status.
“We think advertising could double this year and could grow at 48% annually through 2030 to reach $16 billion,” Seaport analyst David Joyce wrote. Joyce believes Netflix could generate as much as $3.1 billion in advertising revenue this year alone, with the firm estimating the streaming giant garnered around $1.6 billion in 2024.
This isn’t beyond the pale — Netflix Co-CEO Greg Peters said in the company’s Q2 earnings report that it expects to double ad sales in 2025, although he didn’t supply specific figures. Netflix also said it expected ad revenue to increase 17% in the third quarter YoY.
Netflix stock price was up more than 6% since Seaport and Joyce issued their note on Oct. 6. The bump came after a minor hiccup a week earlier — Netflix tumbled around 2% on Wall Street, the same time when Elon Musk tweeted that parents should cancel their Netflix account based on the appearance of a transgender character in an animated series cancelled nearly three years earlier.
But ending the second quarter with more than 300 million subscribers spread across more than 190 countries, not even a culture-war agenda of the world’s richest man can stop Netflix.
Netflix generated $39 billion in revenue overall in 2024, and it expects to make between $44.8 billion and $45.2 this year. So even at $3.1 billion, advertising remains a niche part of its business, accounting for around 7% of the revenue pie.
But the trajectory of Netflix’s ad business suggests this ratio will soon rise.
Netflix reported 94 million ad-supported monthly active users in May, an increase over just 70 million in November 2024. Just how many of those ad plan subscribers are in the U.S. hasn’t been disclosed. The company offers its ad-supported tier to U.S. customers for $7.99 a month. The tier is also available in Canada, Mexico, the UK, Australia, Brazil, France, Germany, Italy, Spain, Japan and South Korea.
Not only are new regions set to be added to the ad-supported umbrella, there’s new ad tech to consider. Earlier this year, Netflix rolled out “Ads Suite,” the streamer’s in-house, first-party ad tech platform, in the U.S.
“We believe our ad tech platform is foundational to our long-term ads strategy and, over time, will enable us to offer better measurement, enhanced targeting, innovative ad formats and expanded programmatic capabilities. We also recently announced we will integrate Yahoo DSP into our programmatic offering,” the company said in its Q2 shareholders letter.
Meanwhile, Netflix is making progress developing other niche revenue streams, some even smaller. Earlier this week, the company announced five of its video games can be played on smart TVs — Lego Party!, Pictionary Game Night, Party Crashers: Fool Your Friends!, Boggle Party, and Tetris: Time Warp. Netflix has been dabbling in games for several years, but most of the output has been targeted to mobile but in January executives cited plans to introduce party and couch co-op games served on the TV and delivered from the cloud.