Netflix Stock Primed for Growth as Advertising Engine Gains Momentum

Netflix's strategic shift towards advertising is increasingly viewed as a key driver for future growth, with analysts projecting substantial revenue contributions from its ad-supported tier in the coming years. 

The stock's (NASDAQ: NFLX) trajectory is closely tied to the success of its advertising initiatives. Wedbush Securities, for instance, has reiterated an “Outperform” rating, reaffirming the price target of $1,500.  Advertising revenue is expected to become Netflix's primary revenue driver by 2026, fueled by initiatives such as incorporating live events and enhancing ad solutions.

Netflix's foray into advertising has already demonstrated considerable promise. By November 2024, the ad-supported tier had amassed 70 million monthly active users globally, nearly doubling in six months. This tier, priced at $6.99 per month in the U.S., accounted for over half of new sign-ups in regions where it was available.

The company's financial performance reflects the positive impact of these strategic initiatives. In Q2 2025, Netflix reported a 16% year-over-year revenue increase to $11.08 billion and a 46% surge in net income to $3.125 billion. This growth was attributed to a combination of increased membership, higher subscription prices, and rising ad revenue.

Netflix also raised its 2025 revenue forecast to between $44.8 billion and $45.2 billion, signaling 15–16% growth, with the operating margin target adjusted upward to 29.5%, and expectations to double ad revenue in 2025.

Live Events and Future Strategy

Netflix's investment in live events, such as the Mike Tyson versus Jake Paul boxing match, underscores its potential in live sports and its ability to boost engagement and ad revenue. Wedbush noted that this move positions Netflix to accelerate ad-tier revenue growth by adding more live events and improving advertising solutions.

The company is also focused on enhancing ad targeting, expanding ad partnerships, and broadening its content strategy to further drive ad revenue contribution.

Analysts at JP Morgan have also projected that the ad-supported tier will become the primary revenue growth driver by 2026, with expectations of 31 million ad-tier subscribers by the end of 2024 and 42 million by the end of 2025.

This growth is anticipated to contribute over 10% of total revenue by 2027, further solidifying the ad-supported tier's importance in Netflix's financial outlook.

The market's reaction to Netflix's strategic shift and financial performance has been largely positive, with analysts expressing confidence in the company's advertising strategy. As Netflix continues to innovate and expand its advertising capabilities, it appears well-positioned to drive significant revenue growth and enhance shareholder value in the eyes of the street.