A：No, Netflix's view has not changed. The previous long-term goals were based solely on organic progress and did not include any assumptions or expectations of M&A. However, the company has now seen continued growth and is forecasting more healthy organic growth for the upcoming year.

A：In 2025, Netflix met or exceeded all financial objectives with 16% revenue growth, roughly 30% operating profit growth, expanding margins, growing key free cash flow, and ad sales increasing 2.5 times. The company is forecasting its business to roughly double again in 2026 to about $3 billion.

A：For 2026, Netflix's key priorities and plans include improving the core business by increasing the variety and quality of series and films, enhancing the product experience, growing and strengthening the ad business, building out new initiatives, and expanding into new content categories. The company is also focusing on strengthening its cloud-first game strategy, finalizing the acquisition of Warner Brothers Studios and HBO, and is on track for a forecasted 2026 revenue of $51 billion, up 14% year on year.

A：The content amortization growth forecast of 10% in Netflix's earnings letter implies an acceleration from 2025. The context provided is that there is a strong release schedule throughout the year, with a shift from a heavily back-half weighted slate in 2025 to more typical seasonality in 2026. This means the first half of 2026 is expected to have higher year-over-year content expense growth as it grows off a smaller base from the first half of the previous year. However, for the full year, content amortization is estimated to increase roughly 10% year over year, with the content cash to expense ratio holding steady at about the 1.1x ratio that has been managed in recent years.

A：The key drivers of top line revenue for 2026 include membership growth, pricing, and a significant increase in ad revenue, which is expected to roughly double to about $3 billion. For operating margin guidance of 31.5%, the company aims to maintain its approach of balancing investment into the core business with spend discipline to grow margins each year.

A：The company's strategy involves balancing investment into its core business to drive revenue growth with spend discipline. They aim to grow margins each year, and while the rate of year-over-year growth may vary based on investment opportunities, they have seen an average expansion of about 2 percentage points annually on operating margins.

A：The targeted operating margins for 2026 are 31.5%, which is an increase of 2 points from the previous year. There is a half a percentage point drag from expected M&A expenses that impacts the margin guidance, but if excluded, the guidance would be about 2.5 points of margin expansion.

A：Recent investment opportunities mentioned for strengthening and expanding the entertainment offering include new license deals with Sony, an exclusive Global Pay One movie deal, expanded universal licensing deals that include live action films, and a new slate of licensed titles from Paramount.

A：Beyond content, the company is investing in technology and development, building out an ad tech stack, evolving the mobile UI, adding new live operation centers, and enhancing sales and go-to-market capabilities to drive advertising growth. They are also investing in cloud-first gaming to make TV games more accessible.

A：The company assesses the value delivered to customers based on viewing hours and quality of engagement. While total viewing hours are important, the company continues to develop an understanding of how to measure the value delivered, recognizing that not all engagement is equal and considering factors like the quality of engagement and specific metrics related to live programming and fan anticipation.

A：The service achieved an all-time high in the primary quality metric related to member satisfaction.

A：Improved member satisfaction and retention reflect a successful approach to delivering value to members, which translates to revenue growth and overall business health.

A：Total view hours are considered an overly simplified metric because they are influenced by various factors like plan mix, tenure mix, geography, and culture differences, which can skew the view hours per member.

A：The company assesses engagement levels by looking at a portfolio of quality metrics, not just total view hours, which includes improving quality leading to better retention and customer satisfaction.

A：The company's strategy to improve the value delivered to members includes enhancing production quality, improving local content market fit through licensing and partnerships, and focusing on organic growth prospects.

A：The planned acquisition of Warner Brothers will not impact the company's approach to pricing or service strategy in the near to intermediate term.

A：During due diligence, the acquisition of Warner Brothers became more exciting due to several elements such as an effective film studio, a healthy television studio that expands production capability, and the HBO brand, which adds prestige and value to the company's existing service.

A：HBO will complement Netflix's existing service by adding more series and films, enhancing the value offered to consumers, and leveraging Netflix's global footprint and streaming expertise.

A：Post-acquisition, the combined company is estimated to generate roughly 85% of its revenues from the core business that Netflix is currently in, making the acquisition an accelerator to the core strategy.

A：Warner Brothers is confident that the acquisition will obtain the necessary regulatory approvals as the deal is considered pro-consumer, pro-innovation, pro-worker, pro-creator, and pro-growth. They have already made progress by submitting an HSR filing and working closely with the relevant authorities including the US Department of Justice and the European Commission.

A：The acquisition aligns with Warner Brothers' strategy by providing access to 100 years of deep content and IP for more effective development and distribution, which benefits consumers and the industry as a whole. HBO, another asset mentioned, is seen as a complementary service in a very competitive TV market.

A：The television industry has become extremely dynamic and competitive, with services blurring lines around TV consumption and increasing competition for creators, consumer attention, and advertising dollars. Companies are expanding beyond traditional TV to include streaming, broadcast, cable, gaming, social media, and big tech video platforms. Warner Brothers believes that their deal will strengthen the marketplace, ensuring healthy competition and benefits to consumers.

A：There has been no change in the film strategy; Warner Brothers will continue to produce a slate of Netflix original films and license films in every available window.

A：Live events are important and differentiated parts of the service, contributing positively to conversation, acquisition, and retention. Investments in events like Star Search and the World Baseball Classic in Japan are being made to continue building out and strengthening the live events offering.

A：Warner Brothers is pleased with the early results of video podcasts, seeing them as a modern talk show with a broad offering of passionate engagement. Initial observations indicate a successful mix of formats such as sports, comedy, and entertainment, with plans to add more member-liked content.

A：Warner Brothers' view on theatrical windowing has changed as they will enter the theatrical business following the deal closure. They will maintain the 45-day window for Warner Brothers films, as they are today. They plan to leverage the acquisition to have a scaled, world-class theatrical distribution business with more than $4 billion of global box office.

A：The narrowing gap means that Netflix is under realizing revenue growth in the near term, but it also presents an opportunity to drive more revenue as the company improves its ad capabilities.

A：Netflix is expanding demand sources, improving execution speed on its ad tech stack, increasing fill rates, and enhancing ad products and measurement. It aims to monetize growing inventory and has plans to use its own data to improve media buys.

A：The additional access to Netflix first-party data in a privacy-safe manner will allow advertisers to use a deep library of insights to enhance the performance of media buys.

A：Netflix is offering a wider array of ad formats including enhanced interactivity, modular capabilities with interactive video ads, and plans to roll out these capabilities globally by Q2 2026.

A：Netflix's cloud-based TV games have seen a positive response, with roughly a third of members accessing TV-based games. They are in the early stages of rollout and expect strong engagement growth. Netflix plans to expand the cloud-first strategy and has announced the reimagined FIFA football simulation game for TV.

A：Netflix has been testing vertical video features for some time and has a mobile experience with a vertical video feed available for several months. The company is working on a new mobile UI that will include new content types like video podcasts and is set to roll out later in 2026. Therefore, Netflix does not consider vertical video a lower priority, as it is part of ongoing testing and the broader upgrade of the mobile experience.