Why Netflix Is Still Outrunning Rivals
The Takeaway
- Netflix’s revenue growth rate significantly outpaces major streaming rivals.
- Netflix generates billions in cash annually, valuing the company at $470 billion.
- Netflix’s ad business is on track to more than double revenue this year.
Netflix’s quarterly earnings reports have lately lacked the drama that once made the updates a must-watch for investors and reporters. For the past eight quarters, the video streamer has routinely posted quarterly revenue growth averaging around 15%—hardly hypergrowth but a big improvement on the 2% to 4% growth rate it recorded between late 2022 and late 2023. Nowadays the results are so predictable that it would be easy to tune them out.
But Netflix is achieving something rarely seen in business. Since last fall, it has been growing at roughly double—or more—the rate of two of its biggest rivals in streaming, Walt Disney Co. and Warner Bros. Discovery, even though those companies have fewer subscribers and have been in the market for less time. As the biggest streaming firm, Netflix would be expected to grow more slowly than smaller rivals. (Other major rivals, such as Amazon Prime Video and YouTube, don’t disclose total revenue, making comparison impossible.)
That reality explains a lot of what is going on in streaming nowadays, including why WBD is now on the sales block—if the company had grown faster, its stock price would be higher and it wouldn’t be so vulnerable to a hostile takeover. It also explains Netflix’s premium stock price, which values the company at close to $470 billion, more than twice Disney’s valuation and several times WBD’s.
It also puts pressure on whoever will succeed Disney CEO Bob Iger, who is due to step down at the end of 2026. While both WBD and Disney have managed to turn their streaming operations into profitable businesses, that’s been at the cost of growth. Netflix, in turn, has sharply accelerated its growth even while continuing to churn out billions in cash every year. Last week, for instance, Netflix reported 17% higher revenue for the third quarter, while free cash flow rose 21% from a year-earlier to $2.7 billion.
In raw numbers, WBD’s streaming operations are generating around $2.8 billion a quarter in revenue, while Netflix’s quarterly revenue is running above $11 billion. Disney is in between (see accompanying chart). At its recent growth rate, Netflix is adding around $1.5 billion every quarter compared to the year earlier, while WBD is adding a couple of hundred million dollars. (Disney and WBD haven’t yet reported for the September quarter, although a report last month by Wall Street research firm MoffettNathanson estimated neither would show much improvement in their growth rate for the second half of 2025.)
At the current growth rates, Netflix is only going to get further ahead in streaming. The more cash it generates, the more money it has to spend on programming.
What’s driving the diverging growth rates of Netflix compared with Disney and WBD? Over the past 18 months, Netflix’s quarterly disclosures have attributed its revenue increases to adding subscribers and raising prices. In the past two quarters, it has also mentioned growth in advertising. That’s a sign that the ad business, which Netflix only entered in late 2022, is now becoming significant. But the company doesn’t disclose enough detail to show how much of the growth comes from either subscriber increases or advertising.
Adding subscribers should be harder for Netflix, which finished last year with 301 million global subscribers and therefore should be closer to saturating the market. Disney and WBD are much smaller—156 million for Disney and 125.7 million for WBD as of the end of June. (Netflix stopped disclosing subscriber numbers at the end of 2024 and Disney has said it will stop disclosing them in the fiscal year which just began).
Disney’s revenue growth slowed sharply in the past 12 months, along with its subscriber growth. Some of that is an accounting adjustment due to its transfer of its Indian streaming service into a joint venture in late 2024, to be sure. But its subscriber growth rate elsewhere in the world has slowed at the same time. That is likely a result of the price increases that have driven what revenue growth it has reported.
Meanwhile, WBD has done better at adding subscribers as it has expanded into new global markets. But the average price it can charge in most of these markets is a third of what it charges in the U.S., which means its revenue growth lags its subscriber growth.
The average revenue it gets from subscribers in the U.S., meanwhile, has been dampened by bundling deals with other companies where WBD gets less per subscriber than it would on its own.
Like Disney and Netflix, Warner has relied on regular price increases to juice revenue—and WBD CEO David Zaslav has indicated that’s likely to continue. He told a recent investor conference, sponsored by Goldman Sachs, that consumers nowadays are paying “dramatically less” for content than they were a decade ago. As a result, he argued that “over time, there’s a real opportunity…to raise price.”
Netflix may be doing a better job of balancing price increases with growth. Its lowest tier of service—the one that carries ads—is cheaper than rivals’ comparable services, according to MoffettNathanson’s recent report. That tier is only $7.99 a month, $2 or $3 a month less than most other services. That enables it to more easily draw in price-sensitive consumers.
Its top tier, on the other hand, is pricier than its rivals’. As MoffettNathanson analyst Robert Fishman said in last month’s report, “This pricing structure allows Netflix to capture the highest-value, least price-sensitive customers.”
Certainly the gap is closing at the top end. WBD announced this week that HBO Max’s top price would rise to $23 a month, $2 below Netflix’s top tier.
Both Disney and WBD might do better in streaming growth next year. In 2026 WBD is expanding HBO Max into the U.K., Germany and Italy, three markets where its pricing should be closer to the U.S. market. Disney, meanwhile, should be able to jump-start its streaming growth in the next year thanks to the recent launch of its ESPN streaming service.
Netflix, though, has its own growth driver, one that might accelerate—its ad business. The company hasn’t yet revealed how much money it is making from selling ad space, although co-CEO Greg Peters said on the third-quarter earnings call on Tuesday that the company was “on track to more than double ad revenue this year.” He noted, though, that the increase was “off a small base relative to the size of our subscription revenue.”
One issue that Netflix has had is that the proportion of its audience seeing ads may not be as high as it is for Amazon Prime Video, which introduced ads by putting them into every subscriber’s service unless they opted out. Over time, however, the fact that Netflix’s ad tier is cheaper than its rivals’ means it is likely to attract more subscribers. And because of Netflix’s popularity, advertisers will want to buy spots on the service.
Still, advertisers have some complaints about Netflix’s ad offering. One ad agency executive, David Nyurenberg, a senior vice president of digital at ad agency InterMedia Advertising, said Netflix differs from other streaming services in its unwillingness to give advertisers the data they need to assess whether its ads drive sales. Other streaming services give advertisers data allowing them to determine whether people who are shown an ad later make a purchase.
“I would love to be on Netflix, at least test it out, but the performance measurement makes it a nonstarter,” Nyurenberg said, adding that advertising on Netflix is also relatively expensive in terms of cost per thousand impressions, which also made the streaming service a tough sell for his clients.
Another ad buyer also said they invested first in Amazon Prime Video before spending money on Netflix, because Amazon had more experience in advertising.
Longer term, though, Netflix’s growing audience will attract advertisers, Nyurenberg said.