Netflix, once known for its aversion to advertising, has rapidly transformed its business model to embrace ads—and the results are turning heads on Wall Street. After launching its ad-supported tier in late 2022 as a response to slowing growth and increased competition, the company now finds itself with over 94 million global monthly active users on the plan, more than doubling from 40 million the previous year21. In markets where the ad tier is available, more than 40% of new subscribers are choosing the lower-cost, ad-supported option1.
A Booming New Revenue Stream
Analysts are increasingly bullish about Netflix’s advertising prospects. Jefferies projects that the streamer’s ad business could reach $10 billion in annual revenue by 2030, while Oppenheimer forecasts $6 billion by 2025—up from $4.6 billion previously estimated1. MoffettNathanson also expects ad revenue to surpass $6 billion by 2027, highlighting the significant runway for growth1.
Despite this momentum, advertising currently accounts for a relatively small portion of Netflix’s total revenue—about $2 billion in 20251. However, this leaves ample room for expansion, especially as Netflix continues to scale its proprietary ad-tech platform, the Netflix Ads Suite, which is rolling out globally by the end of 202556. Partnerships with major programmatic ad firms like The Trade Desk, Google’s DV360, and Magnite are further enhancing Netflix’s ability to target and sell ads efficiently1.
Strategic Advantages and Industry Context
Netflix wasn’t the first streaming service to offer an ad-supported tier—Hulu, Peacock, and Paramount+ led the way—but its global scale and premium content give it a unique edge1. Nearly half of all streaming subscriptions across major platforms are now ad-supported, reflecting a broader shift in consumer behavior: viewers are willing to accept ads in exchange for lower monthly costs1.
The company’s ad-supported plan has also become a key lever for pricing flexibility. Instead of blanket price hikes, Netflix can steer budget-conscious users toward the ad tier, helping to maintain or even increase average revenue per member (ARM) with minimal churn1. Recent price increases, including a bump in the ad-supported plan to $7.99 per month, have not triggered significant subscriber losses1.
Growth Drivers and Financial Impact
Netflix’s robust content pipeline—including new seasons of hit series like “Squid Game” and “Stranger Things,” as well as live NFL games—is expected to drive further subscriber and ad revenue growth1. Analysts anticipate that free cash flow will grow at a 20% compound annual rate over the next five years, reaching $18 billion by 2030, with advertising serving as a high-margin catalyst1.
The company expects its ad revenue to double in 2025, supported by the global rollout of its ad-tech platform and expansion into new markets67. In the first quarter of 2025 alone, Netflix reported a 12.5% year-over-year increase in revenue, reaching $10.54 billion, with ad revenue playing a growing role in that success56.
Risks and Challenges
There are still hurdles ahead. Some analysts warn that the ad tier could cannibalize higher-paying, ad-free subscribers, potentially impacting margins1. The rising costs of acquiring live sports and entertainment rights could also weigh on profitability. Additionally, Netflix is still developing the backend infrastructure needed to compete with tech giants like Google and Meta in the programmatic ad space1.
The Bottom Line
If Netflix can balance its brand identity with a scaled-up ad business, it stands to achieve profitable, diversified growth—something rare in the streaming industry. The platform that once disrupted cable television by eliminating ads may now be poised to inherit a significant share of the ad dollars that fueled it
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