While Netflix continues to try and solidify its pending $83 billion acquisition of the Warner Bros. Discovery studio and streaming businesses (including an amended all-cash offer earlier today), the streamer reported yet another round of solid quarterly and full-year financial results.
First a couple of key metrics, where the SVOD giant met or surpassed all financial goals for 2025: Full-year 2025 revenue totaled $45.2 billion, up 16% year-over-year and recorded an operating margin of 29.5% (up 3 points). Ad revenue was up more than 2x compared to 2024 to over $1.5 billion.
For 2026 it forecasts revenue between $50.7 billion and $51.7 billion, with ad revenue expected to roughly double to about $3 billion.
Here’s a summary snapshot of Netflix Q4 2025 financial metrics and the Q1’26 forecast:
Netflix stopped reporting regular quarterly subscriber metric updates but disclosed passing a milestone in Q4 of 325 million paid subscribers globally.
When Netflix made the decision to pull back on subscriber metrics in Q1 2025, it put increased emphasis on engagement as the metric that’s indicative of subscriber health and value delivered.
On that front, executives on the earnings call and comments in the shareholder letter said that engagement remains healthy – but affirmed that not all engagement is equal
Not all engagement is equal
To illustrate continued engagement on the SVOD, Netflix’s quarterly shareholder letter noted that view hours in the second half of 2025 increased 2% year-over-year, driven by a 9% rise in viewing of branded originals with a strong Q4 slate that included the final season of hit Stranger Things, drawing 120 million views.
In total, viewers streamed 96 billion hours of Netflix in the second half of 2025 (reflecting 1.5 billion hours more than the same period a year ago).
But that uptick in engagement was partially offset by a year-over-year decline in viewing of licensed content, which primarily reflects the SVOD offering a lower volume of licensed, second-run content across most regions (compared to 2023-2024 when it licensed more content in light of the then-WGA Hollywood writers’ strike that temporarily shut down new productions).
Tuesday’s earnings letter emphasized that to grow engagement, Netflix’s primary focus is to continue improving the variety and quality of its core TV series and film offering, including both originals and licensed titles.
In addition to core content efforts, other growth and investment focus areas include improving and expanding the ads business, building out live events – including outside of the U.S. like with the World Baseball Classic in Japan in March - expanding to new content categories like video podcasts, and working to scale its cloud-based TV gaming strategy.
And where it sees the potential acquisition of WBD’s studio and streaming businesses – including iconic IP alongside the Warner Bros. TV and film studios, HBO and HBO Max – as helping to boost to the strategy.
But when it comes to engagement, an equity analyst on the call questioned how directly tied the engagement metric is to things like churn and pricing power.
Netflix co-CEO Greg Peters affirmed that viewing hours is a key factor in assessing the kind of value the company is delivering (and that in turn drives results for things like retention, acquisition and so on), but that it’s one of many, and it too is nuanced.
“Beyond view hours…all hours of engagement are not the same, and we really care about the quality of that engagement,” Peters said.
He noted certain types of programming like live sports with the Christmas Day NFL games, is an example where a given hour of entertainment “has the potential to deliver outsized value.”
To support live efforts outside of the U.S. Netflix is adding more live operations centers, with one in the UK and one in Asia this year.
One-time events like NFL games usually represent only a small portion of total view hours and content spend for Netflix – but again typically “have outsized positive impacts on the business” in terms of driving conversations and subscriber acquisition.
When it comes to quality engagement, same goes for series or movies that create strong fandoms to ultimately drive engagement that extends beyond straight viewing hours.
Netflix co-CEO Ted Sarandos during earnings cited Stranger Things and K-Pop Demon Hunters as examples of content that strong fueled fandoms. It’s fandoms like those he categorized as “such a powerful engine” for the business “because it creates advocates for Netflix” that are valuable to the company even outside of the hours they spend watching the actual content.
Netflix has become more sophisticated in terms of how it measures the quality of that engagement, per Peters, who said the company “achieved in ’25 an all-time high for the service” on its primary quality engagement metrics.
Delivering more entertainment value and quality engagement in turn shows up in core metrics like subscriber acquisition and retention, the executive said, with value delivered (as seen by quality engagement) ultimately translating directly to revenue growth and overall health of the business.
“We're really super confident we're going to continue to grow engagement, but more importantly, the value of that engagement as well, because that's what it allows us to sustain healthy revenue growth in the long term,” Sarandos commented.
WBD an ‘accelerant’ to the strategy
Still, one analyst on the call noted that Netflix’s semi-annual Engagement Report may suggest that the pending WBD acquisition shows there’s a need for Warner Bros.’ content to address stagnant engagement levels on the SVOD giant.
In response, Peters emphasized that view hours alone are an overly simplified lens into engagement and trends, as it’s broad and there are nuances. Which is why Netflix is also looking at those aforementioned quality engagement factors that translate to things like retention. Peters sees room to keep improving quality scores and said he feels “very optimistic” about organic growth prospects, even without M&A.
Some avenues to help drive quality engagement, which Netflix looks at from a portfolio level per Peters, include more licensing and partnerships with local creative communities and local broadcasters in international markets to improve regional content resonance.
That said, as Netflix gears up to secure a WBD shareholder vote and – if successful – regulatory approval for its proposed (and recently sweetened all-cash) $83 billion deal for WBD’s streaming and studios business, the executive touted the Warner Bros. 100-year entertainment legacy and library of new shows and films as an “accelerant” to the strategy.
“That's another mechanism to improve our offering for our members,” Peters commented. “So our job is to identify the best opportunities to improve that offering, both organic and through selected M&A, and always remain flexible and disciplined in pursuing those opportunities.
And later on the call Peters was sure to emphasize the high-quality nature associated with HBO content, saying it’s very complementary to Netflix’s existing business.
“You've got HBO. It is an amazing brand. It says prestige TV better than almost anything. Customers know it. They love it. They know what it means.”
Theatrical windowing shift: Business not religion
With some of the concerns raised so far about a WBD-Netflix deal revolving around the impact on theatrical releases and the box office, Netflix execs again worked to explain the seeming stance reversal and reiterate commitments to the theatrical business model.
Peters noted that existing film output deals show “the theatrical model is an effective complement to the streaming model.”
Before the proposed WBD acquisition, Netflix in public had largely rebuffed the box office but on Tuesday execs stressed that in the company’s history there were often times the SVOD debated building out a theatrical business but that it never made the list as an investment priority.
But with WBD it would have an established, well-known engine, and not have to build from the ground up.
“Now with Warner Brothers, they bring a mature, well-run theatrical business with amazing films, and we’re super excited about that,” Peters commented.
The TV studio business, meanwhile, he said complements and expands Netflix’s production capabilities, where it intends to continue WBD’s practice to produce and supply shows for third parties.
Sarandos for his part again suggested earlier comments about theatrical windowing being outdated came at a time when Netflix itself wasn’t in the theatrical business – but times have changed and as such, so has his thinking.
“This is a business and not a religion,” Sarandos said. “So conditions change and insights change. And we have a culture that we re-evaluate things when they do.”
And he reaffirmed a traditional theatrical-release window if the WBD deal gets done.
“When this deal closes, we will have the benefit of having a scaled, world class theatrical distribution business with more than $4 billion of global box office, and we're excited to maintain it and further strengthen that business,” Sarandos commented. “So Warner Brothers films are going to be released in theaters with a 45-day window, just like they are today.”
He also noted WBD has three core businesses that Netflix doesn’t, and wants current teams to stay on and run those.
“So we’re expanding content creation, not collapsing it in this transaction,” he said. “This is going to allow us to significantly expand our production capacity in the U.S. and to keep investing in original content over the long term, which means more opportunities for creative talent and more jobs.”
A WBD shareholder vote on the Netflix agreement could happen in April, where Paramount continues its own hostile takeover pursuit to purchase all of the company despite repeated rejections from WBD’s board of directors.