April 16, 2026, at 4:45 p.m.
ET Call participants Co-CEO — Theodore SarandosCo-CEO — Gregory PetersChief Financial Officer — Spencer NeumannVice President, IR & Corporate Development — Spencer Wong Need a quote from a Motley Fool analyst? Email [email protected] Revenue growth guidance -- Management maintained full-year revenue growth guidance at 12%-14%.Operating margin guidance -- Projected operating margin remains at 31.5% for the year.Advertising revenue target -- Company reiterated its goal of "roughly doubling the advertising business to about $3 billion."Paid membership base -- Cited "more than 325 million paid members" at year-end, with increasing momentum.Global addressable market share -- Company estimates capture of 7% of available market revenue, totaling $670 billion, and only 5% of global TV view share.APAC performance -- APAC was described as the strongest FX-neutral revenue growth region, supported by successes in Japan, India, Korea, and Southeast Asia.World Baseball Classic impact -- The event achieved 31.4 million viewers, was the most-watched program ever in Japan, and resulted in the largest single sign-up day in Japan’s history.Content engagement metrics -- View hours rose at a rate similar to 2025; the company’s main "member quality metric hit another all-time high."Price increases -- Recent U.S.
subscription price changes produced early signals that are in line with expectations and similar to historical performance, with retention reported as "strength.
Across the board."Programmatic advertising -- Programmatic ad buying is "on its way to becoming more than 50% of our non-live ads business."Advertiser base expansion -- Total advertisers grew "over 70% year over year in 2025 to more than 4,000 advertisers."Gaming initiatives -- The company stated the consumer gaming market opportunity is "$150 billion in consumer spend ex-China, ex-Russia," and highlighted the launch of Netflix (NFLX +0.16%) Playground, a dedicated kids’ gaming app.M&A expense guidance -- CFO Neumann noted M&A-related expenses, including Interpositive and Warner Brothers, are "still in the ballpark" of the original $275 million forecast, with "no material impact on our operating margin outlook."Artificial intelligence strategy -- Management expects GenAI to "help make content better," and the Interpositive acquisition "accelerates our GenAI capability" with tools built specifically for filmmakers.Leadership transition -- Reed Hastings will not stand for reelection as board chair at the coming annual meeting.
Management emphasized a multiyear strategic focus on enhancing entertainment value, leveraging technology across all operating areas, and expanding monetization through pricing, partnerships, and advertising.
The call highlighted new content categories such as podcasts, regional live sports, and gaming, citing specific successes like the rapid engagement growth in APAC and the impact of the World Baseball Classic.
M&A decisions were portrayed as disciplined, with costs aligned to prior guidance, despite the pulled-forward Warner Brothers expenses and the integration of Interpositive.
The company conveyed strong internal confidence in both operational execution and the breadth of market opportunity.
The end of Reed Hastings’s board tenure marks a notable governance transition for the company.
Management said, "We have captured about 7% of addressable revenue in countries and categories that we currently directly participate in," underscoring the room for continued share gains.Plans for expanding the ad business remain unchanged despite methodology shifts at Nielsen, as "Nielsen Gauge is not the currency for the video marketplace."Use of generative AI tools was noted as already increasing member engagement and enhancing both production safety and innovation in creative processes.Gaming investments remain "still small relative to overall content spend," as the company links incremental engagement and retention to these projects.
Industry glossary FX-neutral revenue: Revenue growth metric that excludes the impact of foreign exchange rate fluctuations.GenAI: Generative artificial intelligence used to enhance content creation, production, and internal processes.DSP (Demand-Side Platform): Software enabling advertisers to buy digital advertising inventory programmatically.SVOD: Subscription Video on Demand; paid streaming services providing access to video programming.Pay-1 deal: An agreement granting a streaming platform first-window exclusive rights to newly released films after theatrical and home video release.
Full Conference Call Transcript Gregory Peters: Perhaps I can kick this one off and step back with a high-level framing.
Of course, it is early in the year.
There is still plenty of time to go and plenty of work left to do.
But we have seen really good progress so far in this first quarter that builds on the solid momentum and results from 2025.
Given that, we are maintaining our guidance and strong outlook for organic growth that we established for 2026: revenue growth of 12% to 14% and operating margin at 31.5%.
That includes roughly doubling the advertising business to about $3 billion.
We ended last year with more than 325 million paid members, and as that number continues to grow, we are entertaining an audience that is approaching a billion people, which is an exciting milestone to strive for and to achieve.
Even given that number, we still have plenty of room to grow into our addressable market.
From an addressable household perspective that have good data and a smart TV, we are still under 45% penetrated.
We think that number is roughly 800 million, and it grows every year.
We have captured about 7% of addressable revenue in countries and categories that we currently directly participate in.
We now estimate that is $670 billion as of 2026, and that number grows year over year as well.
We estimate that we account for only 5% of TV view share globally.
By pretty much any measure, we have tons of room for growth still ahead of us.
Theodore Sarandos: I would add, looking ahead, we are focused on three big priorities.
Number one, deliver even more entertainment value for our members, and we do that by continuing to strengthen our core offering—series and films, originals and licensed.
We are also pushing into new categories that are really exciting, like our further expansion into podcasts—we announced a few exciting new ones today—adding more regional live sports events, like the incredible event we just did in Japan with the World Baseball Classic, and growing our games offering, including the brand-new kids gaming app.
Number two, we are leveraging technology to improve the service—from how it is delivered to how to find great things to watch, and now even how content is created and produced.
Number three, we are improving monetization through a combination of broad distribution—mostly organic, supplemented with some great partners— increasingly sophisticated pricing and pricing plans, and a great and growing ad business as Greg just said.
These features help position us to deliver multiyear growth beyond the 12% to 14% that we expect to deliver this year.
At Netflix, Inc.
we embrace change, thrive on competition, and stay focused on constant and consistent improvements—the things that make us faster and better than the competition in whatever form it takes.
We feel great about the business and the organic growth opportunity ahead.
We are as energized as ever to achieve our mission to entertain the world.
Spence, maybe you could talk a second about the WB deal cost and the guide.
Spencer Wong: Yeah.
Thanks, Ted.
So with respect to the Warner Brothers deal.
Spencer Neumann: And those costs and how it impacts the guide: you may recall back in January, our initial forecast or guidance for the year was carrying $275 million of cost for M&A-related activity.
That was not just Warner Brothers, actually.
One item we were carrying was the Interpositive acquisition.
It was not announced yet, but it was in our guidance, and that carries through our OpEx, which impacts operating margin.
For Warner Brothers specifically, even though we walked away from the deal, some of our initially planned costs for the deal will not fully materialize, but some that we were planning to carry into 2027 were pulled forward into 2026.
When you put all that together, we are still in the ballpark of the total we were projecting for M&A-related expenses in the year.
There is no material impact on our operating margin outlook.
As a result, there is no reflection of some increase or acceleration in other expenses in the year.
Spencer Wong: Thanks, Spence.
Thanks, Ted.
Thanks, Greg.
Following up on that question, we have one from Sean Diffely of Morgan Stanley.
His question is: What have been your biggest learnings from the Warner Brothers experience, and does it in any way change your appetite for M&A or capital structure going forward? Theodore Sarandos: At the risk of being a broken record, we said from the beginning that the WB deal was a nice-to-have, not a need-to-have.
We are very confident in the core business.
Going into it, our biggest risk was losing focus on our core business while working on the transaction.
As you can see from our Q1 results, we did not lose focus.
We are very encouraged by the team’s ability to stay focused on our core business while exploring this opportunity.
Historically, we have been builders, not buyers, so there were questions about our ability to do a deal of this size.
We learned that our teams were more than up to the task.
We learned a lot about deal execution and early integration.
We are proud of the teams that did the work.
We are proud to have won the bid.
We were confident in our ability to get to the finish line with regulators for the approvals we needed.
Mostly, we really built our M&A muscle.
The most important benefit of this entire exercise was that we tested our investment discipline.
When the cost of this deal grew beyond the net value to our business and to our shareholders, we were willing to put emotion and ego aside and walk away.
Doing it at this level sets up our teams to understand that is the expectation of them day to day.
We met a bunch of great people in WBD during this process, so if there is any emotion in all of this, it was the disappointment of not getting to work with those folks.
We do come through this with no change in our capital allocation philosophy.
We invest in the business, both organically and opportunistically with M&A, like you just saw with Interpositive.
We do that while maintaining strong liquidity and returning excess cash to shareholders through share repurchase.
M&A remains a tool to help us achieve our goals, and as you can see with the WB deal, we will remain very disciplined in how we approach it.
Spencer Wong: Thank you, Ted.
I will move us along now to the next topic, which is engagement.
The question comes from Vikram Kesavabhotla of Baird: Last quarter, you shared that your primary quality metric for engagement achieved an all-time high in 2025.
How is this metric performing so far in 2026? What are some examples of the data points that inform your measurement of quality? Gregory Peters: I will take this one.
First, volume of engagement is still relevant.
We track it and seek to grow it.
In Q1, view hours were up at a similar rate of growth to what we saw in 2025, despite having the Winter Olympics—17 days of robust streaming competition—land in Q1 as well.
But while view hours are important, they are just one of several metrics we look at, and we are increasingly making that a more sophisticated view.
Member quality is an important part of that sophistication, with several associated signals, and in Q1 that primary member quality metric hit another all-time high.
I am not going to detail how we compose our metrics; they take time and effort to build and prove out, and I am sure competitors would like that cheat sheet.
We build confidence in our metrics, and specifically this member quality metric, by evaluating their predictive and explanatory power to primary metrics like retention.
That is why we are clear that improving that number improves the business.
As we invest in new forms of content, we also have to learn how the new programming provides different kinds of value.
Live is a great example.
It often drives significant viewing value for members, albeit with fewer view hours than a scripted series, and it has different acquisition characteristics.
We continually build models for how that programming matters to our members and supports the business, and then we can bid appropriately.
Spencer Wong: Thanks, Greg.
Our next question on engagement comes from Rich Greenfield of LightShed Partners.
Nielsen adjusted their methodology—the end result was lower streaming viewership and higher broadcast and cable viewership, albeit the trendlines were similar.
Nielsen has delayed implementing these changes into its monthly Gauge report until 2026.
The base of Netflix, Inc.
viewership will be lower but also have more room to take share.
How do you think about the coming impact, especially on your advertising revenue? Gregory Peters: Nielsen’s methodology change in the Gauge reporting is a change in how they calculate the national TV universe.
It is not a change in how people actually watch TV.
It changes Nielsen’s numbers, not actual viewing behaviors.
Specifically, the new approach reduces the weight of streaming-only households and increases the weight of linear households, which makes streaming look smaller and broadcast/cable look larger on a relative basis as they measure and report.
We, of course, have actual data on how much members stream, and we include that in our engagement report.
That methodology is straightforward, and other streamers have started to measure views in the same way.
As to advertising, Nielsen Gauge is not the currency for the video marketplace.
Given that there is no change in consumer behavior or amount of viewing related to this shift, none of this changes our effectiveness or our aspirations in ads.
We continue to expect to deliver $3 billion in advertising revenue this year; we have not adjusted that target.
On your point about growth potential, independent of this shift, we still see tremendous opportunity to win more moments of truth—especially the most valuable moments.
With our current position of being less than 5% of global TV time, we have a ton of room to grow.
Spencer Wong: Thanks, Greg.
We have several questions about our content and content strategy.
First, from John Hulik of UBS: Any details you can share about the World Baseball Classic viewership? Are there other similar sports and live event opportunities that can appeal to a global audience and drive engagement? Theodore Sarandos: Thanks for asking about the World Baseball Classic, because it was a hit.
It was the most-watched program we have ever had in Japan and the biggest global baseball streaming event of all time, with 31.4 million viewers.
Events like this are important because, as Greg said, they drive outsized business impact and are proof that all engagement is not created equal.
The WBC drove the largest single sign-up day ever in Japan.
Japan led our Q1 member growth around the world and had its highest quarter of paid net adds in our history.
It was also the first big regional live event for us outside of the United States, and we got to flex a new muscle—streaming multiple games concurrently—so a big expansion of our capabilities.
We were excited, the fans were thrilled, and the leagues were excited.
Much more to come.
Gregory Peters: It was also a great example of how we were firing on all cylinders cross-functionally.
Our marketing and partnership teams worked to bring this to Japanese consumers in a friendly way.
It was impressive to see everyone organize around that.
Theodore Sarandos: And a great shot in the arm for our ad sales group in Japan.
One other thing on it—not to dismiss WBC.
Spencer Neumann: Think about it more broadly because, as great as it was—and it was great—you may notice that APAC was our strongest FX-neutral revenue growth market for the quarter.
It was not just because of this.
We had strong performance across APAC: a great quarter in India, a really strong quarter in Korea, and Southeast Asia showed strength.
Across the board in APAC, we executed—it was not just one title or one country.
Theodore Sarandos: I would add it was exciting to see people pick up recent original series so that viewing went up—you saw some of those shows pop back into the top 10.
The success of One Piece on the heels of the WBC created a great halo.
Spencer Wong: I will take the next question from Robert Fishman of MoffettNathanson: With the NFL in the market for new packages, do you judge ROI on live event content spending the same way as scripted content, or does adding NFL games give you the ability to drive higher CPMs and ad growth that one-off scripted shows would not deliver? Theodore Sarandos: That is a great question.
First, our sports strategy is unchanged.
We are most interested in big breakthrough events, less so in regular season packages.
Everything we pursue has to make economic sense in the ways you just talked through, and we consider all the benefits from both viewing and the ads business.
Sports is an important piece of our live strategy, which also includes other big live events—Skyscraper Live, the Star Search reboot with live voting, the BTS comeback concert.
We have had a number of sports successes, including our Opening Night MLB game with the Yankees and the Giants, our Christmas Day NFL games, some big fights, and the WBC in Japan.
The NFL is a....
