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Netflix's Advertising Business Expands Rapidly: Can Momentum Continue?
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Key Takeaways
Netflix expects ad revenues to grow more than 80% in 2026, after a $256 million Q3 increase.
Netflix Ads Suite expands programmatic access; its ad-supported tier is set for 15 more countries in 2027.
Netflix cut its 2026 ad outlook from $3B to about $2.7B after delays; Roku and Disney add competition.
Netflix (NFLX - Free Report) is witnessing rapid expansion in its advertising business, which is emerging as a key growth driver alongside subscriptions. Advertising revenues increased $256 million year over year in third-quarter 2026 and $864 million in the first nine months of 2026. The company expects advertising revenues to grow more than 80% this year amid strong demand and a widening advertiser base.
Netflix is strengthening its ad business through Netflix Ads Suite. During the third quarter, the platform expanded programmatic access through connected-TV marketplace deals and added partnerships with MercadoLibre in Latin America and Adform in EMEA. Investments in first-party measurement, attribution and new ad formats are intended to improve advertiser returns, inventory fill rates and monetization.
Another opportunity is geographic expansion. Netflix plans to introduce its ad-supported tier in 15 additional countries in 2027, with the first launches scheduled for March. More ad-tier members should expand inventory, while improving technology could narrow the gap between ad-supported average revenue per membership and that of its standard ad-free plan. Premium live sports should further support advertiser interest.
However, delays in product rollouts and partner integrations prompted Netflix to lower its 2026 advertising revenue forecast to approximately $2.7 billion from $3 billion. The remaining monetization gap and intense competition for streaming advertising budgets are additional challenges.
Still, expanding reach, richer advertising tools and growing demand position Netflix to sustain strong ad growth, provided it executes its technology roadmap effectively.
Roku & Disney Challenge Netflix in Streaming Ads
Roku, Inc. (ROKU - Free Report) challenges Netflix in streaming ads as competition for connected-TV budgets intensifies. Roku’s advertising revenues grew 25% year over year to $673 million in the second quarter of 2026, supported by first-party data, programmatic capabilities and broad advertiser partnerships. Its competitive advantages include a global reach of more than 100 million households and 37.9 billion streaming hours during the quarter, up 7% year over year.
Disney (DIS - Free Report) competes for streaming advertising budgets through Disney+ and Hulu. At an October 2026 event, Disney reported more than 4,000 brands had advertised on its platform across EMEA since launch and that U.K. ad revenues grew 80% year over year. Its first-party ad technology, interactive formats and premium programming make it a formidable competitor for Netflix's connected-TV ad budgets.
Despite the pullback, Netflix trades at a forward 12-month price/earnings ratio of 16.82X, above the industry average of 14.47X, suggesting that its valuation remains relatively expensive. Its Zacks Value Score of D also indicates limited appeal from a value-investing perspective.
NFLX’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NFLX’s 2026 earnings is pegged at $3.59 per share and remains unchanged over the past 30 days. This indicates a 41.9% increase from the previous year. While strong expected earnings growth provides a potential positive catalyst, the stock’s premium valuation and recent underperformance warrant caution.
View the Zacks #1 Rank List
Image: Bigstock
Netflix's Advertising Business Expands Rapidly: Can Momentum Continue?
Key Takeaways
Netflix (NFLX - Free Report) is witnessing rapid expansion in its advertising business, which is emerging as a key growth driver alongside subscriptions. Advertising revenues increased $256 million year over year in third-quarter 2026 and $864 million in the first nine months of 2026. The company expects advertising revenues to grow more than 80% this year amid strong demand and a widening advertiser base.
Netflix is strengthening its ad business through Netflix Ads Suite. During the third quarter, the platform expanded programmatic access through connected-TV marketplace deals and added partnerships with MercadoLibre in Latin America and Adform in EMEA. Investments in first-party measurement, attribution and new ad formats are intended to improve advertiser returns, inventory fill rates and monetization.
Another opportunity is geographic expansion. Netflix plans to introduce its ad-supported tier in 15 additional countries in 2027, with the first launches scheduled for March. More ad-tier members should expand inventory, while improving technology could narrow the gap between ad-supported average revenue per membership and that of its standard ad-free plan. Premium live sports should further support advertiser interest.
However, delays in product rollouts and partner integrations prompted Netflix to lower its 2026 advertising revenue forecast to approximately $2.7 billion from $3 billion. The remaining monetization gap and intense competition for streaming advertising budgets are additional challenges.
Still, expanding reach, richer advertising tools and growing demand position Netflix to sustain strong ad growth, provided it executes its technology roadmap effectively.
Roku & Disney Challenge Netflix in Streaming Ads
Roku, Inc. (ROKU - Free Report) challenges Netflix in streaming ads as competition for connected-TV budgets intensifies. Roku’s advertising revenues grew 25% year over year to $673 million in the second quarter of 2026, supported by first-party data, programmatic capabilities and broad advertiser partnerships. Its competitive advantages include a global reach of more than 100 million households and 37.9 billion streaming hours during the quarter, up 7% year over year.
Disney (DIS - Free Report) competes for streaming advertising budgets through Disney+ and Hulu. At an October 2026 event, Disney reported more than 4,000 brands had advertised on its platform across EMEA since launch and that U.K. ad revenues grew 80% year over year. Its first-party ad technology, interactive formats and premium programming make it a formidable competitor for Netflix's connected-TV ad budgets.
NFLX’s Price Performance, Valuation & Estimates
Netflix’s shares have declined 33.3% year to date, underperforming the Zacks Broadcast Radio and Television industry and Zacks Consumer Discretionary sector, which have fallen 28.2% and 12.8%, respectively.
NFLX’s YTD Price Performance
Image Source: Zacks Investment Research
Despite the pullback, Netflix trades at a forward 12-month price/earnings ratio of 16.82X, above the industry average of 14.47X, suggesting that its valuation remains relatively expensive. Its Zacks Value Score of D also indicates limited appeal from a value-investing perspective.
NFLX’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NFLX’s 2026 earnings is pegged at $3.59 per share and remains unchanged over the past 30 days. This indicates a 41.9% increase from the previous year. While strong expected earnings growth provides a potential positive catalyst, the stock’s premium valuation and recent underperformance warrant caution.
Image Source: Zacks Investment Research
NFLX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.