MW 'Engagement' is the key theme of Netflix's earnings after the Warner Bros. deal collapsed
By Lukas I. Alpert
Analysts are looking for how much content Netflix's subscribers are actually watching - but a recent price hike and the streamer's growing ad business are expected to help profitability
Netflix on Thursday will report quarterly earnings for the first time since its deal to acquire Warner Bros. Discovery collapsed.
With its failed Warner Bros. Discovery acquisition now behind Netflix, investors are turning their attention to more traditional metrics like engagement as the streamer prepares to report its first-quarter earnings after market close on Thursday.
Analysts have pointed to signs of softening in how much content Netflix $(NFLX)$ subscribers are actually watching these days, and what that means for the streamer's strategy for future revenue growth.
"Total engagement was sort of flat to up slightly in 2025 and, on a per-member basis, was down," said John Belton of Gabelli Funds. "Investors are going to be focused on that metric and trends there, given engagement is really the lifeblood of the company and really what fuels the long-term revenue and earnings growth."
In January, the company had said engagement in the form of "view hours" in the second half of 2025 was up 2% from the same period a year prior, boosted by a 9% increase in view hours of Netflix originals.
But many in the market also believe that Netflix's recent price increase, plus its growing advertising business, should contribute strongly to profitability this year, if not exactly in the first quarter.
"We remain positive on Netflix's overall opportunity to expand revenue in 2026 on both domestic subscription pricing and advertising revenue, while continuing to expand its global footprint," analyst Alicia Reese of Wedbush Securities wrote in a note to clients.
Overall, analysts polled by FactSet are predicting that Netflix will report net income of $3.29 billion in the first quarter, up from the $2.89 billion the company reported in the same quarter last year. Analysts also are estimating earnings per share of 76 cents and revenue of $12.2 billion.
Investors have become more bullish on Netflix since it abandoned its effort in February to acquire Warner Bros. Discovery( WBD) for $82.7 billion, after being outbid by Paramount Skydance $(PSKY)$. Since then, Netflix's stock has risen 39% to its highest point since early December, when it had initially reached an agreement to acquire WBD's studio and streaming businesses.
Soon after walking away from the deal, Netflix raised its subscription prices for the second time in just over a year, pushing its ad-supported tier up to $8.99 a month and its standard and premium tiers to $19.99 and $26.99 per month, respectively.
Bolstering Netflix's coffers is a $2.8 billion breakup fee it collected after Paramount Skydance bested the streaming service's accepted bid for WBD. Analysts expect Netflix to use that money to help further build out its ad stack and to defray some of the $20 billion in content spending it has forecast for this year.
Netflix's ad-supported tier has been viewed as eventually becoming a significant revenue driver for the company, as it is able to sell more and better-targeted ads. Wedbush's Reese noted that Netflix's industry-low churn rate - the rate at which people cancel subscriptions - gives it a strong advantage among advertisers. She predicted that the company would double its ad revenue compared to last year, to $3 billion in 2026.
-Lukas I. Alpert
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 15, 2026 12:51 ET (16:51 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments