Netflix’s (NFLX) latest price hikes are expected to drive revenue growth this year, while its ad tier is seen accelerating sales in 2026, Wedbush Securities said Wednesday.
The streaming giant’s fourth-quarter financial results exceeded estimates late Tuesday as it reported a record addition of new subscribers. Its global paid net additions totaled 18.91 million in the quarter, surpassing market expectations and taking the full-year tally to more than 41 million.
For the US market, the company increased the subscription price to $24.99 from $22.99 for its premium tier. The standard package moves to $17.99 from $15.49, and to $7.99 from $6.99 for its ad-supported tier. Netflix is also raising prices in Canada, Portugal and Argentina.
“When you’re going to ask for a price increase, you better make sure you have the goods and the engagement to back it up,” co-Chief Executive Ted Sarandos said on an earnings conference call, according to a FactSet transcript.
For this year, the streamer now forecasts revenue to grow 12% to 14% annually, reaching $43.5 billion to $44.5 billion. That outlook reflects a $500 million increase from its prior range.
The outlook is based mainly on “significant” price hikes, Wedbush analysts, including Alicia Reese, said in a note to clients.
“While massive subscriber growth was the primary driver in 2024, we expect price increases to drive revenue growth in 2025 and the ad tier to drive revenue higher in 2026,” the analysts said. “As Netflix expands from here, its contribution margin can massively exceed our estimates, driving outsized free cash flow.”
Wedbush raised its price target on the Netflix stock to $1,150 from $950 while reiterating its outperform rating. The company’s shares were up 10% in Wednesday afternoon trade.
Netflix initially launched its ad-supported tier in 12 markets in November 2022, including the US, Canada, and the UK. The company can earn the most in ad tier revenue in these markets, according to Wedbush. “As Netflix continues to add users to its ad tier in these countries, more than 50% of new users opt for the ad tier and primarily choose the same content as premium tier users,” the analysts wrote.
The company plans to increase its cash content spend to $18 billion in 2025 from $17 billion last year, Chief Financial Officer Spence Neumann said on the call.
“Netflix is positioned to accelerate ad tier revenue contribution for the next several years by adding more live events, improving its advertising solutions and targeting, and broadening its content strategy,” Wedbush said.