Netflix reported a fourth-quarter earnings beat, but its shares remained under pressure as investors focused on engagement levels, advertising performance and rising expenses tied to content and potential acquisitions. While subscriber numbers were in line with expectations, advertising has yet to reach hoped-for levels.
BNN Bloomberg spoke with Alicia Reese, senior vice-president of equity research covering media and entertainment at Wedbush, about Netflix’s results, the outlook for its advertising business, content spending and the uncertainty surrounding a potential acquisition.
Key Takeaways
- Netflix reported a fourth-quarter earnings beat, but engagement metrics fell short of some expectations despite subscriber growth meeting forecasts.
- Advertising revenue reached about $1.5 billion, but limited targeting capabilities have slowed advertiser demand so far.
- Planned price increases in 2026 are expected to push more users toward the ad-supported tier, lifting viewership and ad revenue.
- Content spending remains elevated as Netflix invests in films, TV and live events to maintain engagement and profitability.
- Uncertainty surrounding a potential acquisition continues to overhang the stock, keeping investor attention on Netflix’s core growth outlook beyond 2026.
Read the full transcript below:
ROGER: Well, shares of Netflix are under pressure. The streaming giant reported a fourth-quarter earnings beat but warned of rising expenses because of its all-cash bid for Warner Bros. Discovery. Let’s get more now from an analyst who covers Netflix. Alicia Reese, senior vice-president of equity research covering media and entertainment at Wedbush. Alicia, thank you very much for joining us. Netflix is having quite the time right now.
ALICIA: Yeah, they are. They reported some great results yesterday, but expectations are incredibly high right now. The disappointment was not on the subscriber side, though, as it has been in the past. The subscriber number was actually quite in line with what expectations were. However, with all of the live events and all the hoopla around Stranger Things and just all the content they had, the engagement numbers were not quite as high as some had expected. I think, most importantly, the advertising has not quite reached the level that people had hoped it would at this point. So in 2026, the planned price increases are likely going to push more people onto that ad tier and get more people to get that viewership on the ad tier much higher. And as Netflix really hones its advertising strategy and targeting, they’ll be able to really increase advertising revenue in 2026 to at least that three-billion number that they got into.
ROGER: And that’s — what is that? How much did they miss by this year with the ads?
ALICIA: So they reached $1.5 billion this year, which was two-and-a-half times what they were at last year. The problem isn’t the subscribers they’re getting, but they didn’t have the targeting capabilities that a lot of advertisers really need — that attribution and all of the data to support these ad campaigns, especially at the CPMs that connected TV streamers are requiring. So as Netflix hones that strategy, they’ll be able to get a lot more advertisers on board and fill all of the inventory that they have.
ROGER: And with their costs, they were, I believe — was it 10 per cent, I think — for films and TV. Is that something that caught them off guard?
ALICIA: No, I don’t think so. I think spending on content is absolutely reasonable, as long as there’s a rise in profitability that justifies it. And whether or not the M&A deal goes through down the road, they need to drive engagement and they need to drive profitability, which requires the ad tier to really start performing remarkably well. And I think Netflix has all of the tools to make that happen, but to keep that engagement high, they do need all the content.
ROGER: Are they putting all their eggs in one basket with the ad tier, or no?
ALICIA: No, I think that it’s an absolutely necessary path that they need to go down and that they need to win. If they don’t, the engagement — they’re not going to be able to spend that much on their content, and they won’t keep the same level of engagement. They just can’t.
ROGER: And the one thing Netflix has managed to prove is it is a survivor. Nobody thought people would get DVDs, and they adapted. With the Warner Bros. deal, with what’s going on with that, what kind of an impact does the fact that it’s kind of going back and forth have? Is this more than the norm, or are people starting to wonder?
ALICIA: I think there are many concerning elements to it at this point. It’s a wait-and-see situation to see what the shareholders choose to do. If they choose to go with Paramount because they believe the Warner Bros. Discovery assets are worth at or less than $2.25 per share, then they’ll go with the Paramount bid. If they think they’re worth more, then they’ll try for the Netflix bid and spin off Discovery Global. But the regulatory process is going to be long, drawn out and very difficult. There are a lot of hurdles that would need to be passed, and there’s no certainty that it’s going to pass scrutiny. In the end, you have not just the U.S. Department of Justice, you also have the European Commission and the U.K. to pass. So that’s going to be a long, drawn-out process. I think it’s better now to just focus on Netflix’s core business, what they have to offer and what kind of growth they can show in 2026 and beyond.
ROGER: And so what do they do while all that’s unfolding? I mean, if by the end all of a sudden they find out they’ve got nothing, what other things are they looking at to try to offset the possibility that it may not go through?
ALICIA: They’ve just signed with Sony to get a lot of Sony assets on the streamer, just getting as much content as they can at reasonable prices. It’s not easy to do when you don’t own the content. That’s one of the reasons they want Warner Bros., obviously — to get all of that content and not have to pay for it. The Warner Bros. content that they have had on the Netflix service has done very well for them, especially the library content. So it certainly behooves them to buy that in the long run and have all of those assets to work with and get more people on the service, more engagement, and be able to leverage that advertising tier. Ultimately, though, if they don’t get that asset, then they can continue to license content from others or potentially go after Sony or other small studios.
ROGER: Could you see that happening, going after Sony or somebody like that?
ALICIA: It could. You have Sony, you have Lionsgate, you have A24 — there aren’t too many studios left that are solo and standing. But certainly Netflix is going to go after some content deal if this doesn’t work out with Warner Bros.
ROGER: Okay, and with all this unfolding, regional growth outside of North America — what opportunities do they see?
ALICIA: Oh yeah, there are plenty of opportunities for growth outside North America. You have tons of opportunity left in Africa, the Middle East and throughout Asia, especially India. India was a bright spot for Netflix. As long as they keep the tiers priced well, and if they do that in an ad-supported way and have mobile-only plans priced well, that’s great engagement. And if it’s ad-supported, that certainly helps Netflix grow in a more meaningful way.
ROGER: And what happened with India?
ALICIA: Yeah, India saw some really nice growth in the quarter. It was a nice bright spot. They saw some really good engagement, and they saw a nice revenue uptick for the region.
ROGER: Okay, Alicia, thank you very much for joining us today. We appreciate it. Thank you for talking about Netflix. Alicia Reese, senior vice-president of equity research covering media and entertainment at Wedbush.
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This BNN Bloomberg summary and transcript of the Jan. 21, 2026 interview with Alicia Reese are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
