Will Amazon Partnership Help Netflix Double Ad Revenue Targets?

Netflix's NFLX strategic partnership with Amazon AMZN Ads marks a pivotal expansion of the streaming giant's advertising capabilities. The deal provides advertisers direct access to Netflix's premium inventory through Amazon's demand-side platform (DSP) starting fourth-quarter 2025, covering 11 major markets, including the United States, United Kingdom, Japan, and Brazil.

This integration represents a significant evolution from Netflix's initial Microsoft partnership, positioning the company alongside existing programmatic partnerships with Google DV360, The Trade Desk, and Yahoo. Amazon DSP's sophisticated targeting capabilities and first-party insights will enable more precise audience reach across Netflix's 94 million global ad-supported users, a base that has grown dramatically since the tier's November 2022 launch.

The timing aligns with Netflix's accelerating advertising momentum. The company doubled its ad revenues in 2024 and projects another doubling in 2025, with the ad-supported tier now accounting for 55% of new sign-ups in available markets. At $7.99 monthly versus $17.99 for ad-free viewing, the tier has proven compelling for cost-conscious consumers.

Netflix's second-quarter 2025 results validated this strategy, with revenues reaching $11.08 billion, up 16% year over year, prompting management to raise full-year guidance to $44.8-$45.2 billion. The Amazon partnership enhances Netflix's ability to capture connected TV advertising spend, estimated at $25 billion annually. Investors view the Amazon collaboration as accelerating Netflix's transformation from a subscription-dependent model to a diversified revenue powerhouse in the competitive streaming marketplace.

Rivals Scramble for Programmatic Partnerships

Netflix's Amazon partnership intensifies pressure on Disney DIS and Warner Bros Discovery WBD to enhance their programmatic capabilities. Disney, with 157 million monthly active users across ad-supported Disney+, Hulu, and ESPN+, relies on its own Disney Advertising platform but lacks Netflix's breadth of DSP partnerships. Warner Bros Discovery's Max, reaching 117 million total subscribers, employs AI-driven "shoppable" ads and contextual targeting but hasn't announced comparable third-party integrations. While Paramount+ leverages programmatic through various DSPs for its 77.5 million subscribers, it lacks the scale of Netflix's Amazon alliance. Disney's established advertising infrastructure and Warner Bros Discovery's innovative ad formats demonstrate different approaches, yet Netflix's combination of Amazon's reach, existing DSP relationships, and 94 million ad-tier users positions it advantageously. The Amazon-Netflix partnership may force Disney and Warner Bros Discovery to pursue similar arrangements to remain competitive in the programmatic advertising space.

NFLX’s Price Performance, Valuation & Estimates

Shares of Netflix have gained 35% year to date compared with the Zacks Broadcast Radio and Television industry’s return of 12%.

NFLX’s YTD Price Performance

From a valuation standpoint, Netflix appears overvalued, trading at a forward 12-month price-to-sales ratio of 10.42X compared to the broader Zacks Broadcast Radio and Television industry's forward earnings multiple of 4.88X. NFLX carries a Value Score of D.

NFLX’s Valuation

The Zacks Consensus Estimate for NFLX’s 2025 revenues is pegged at $45.03 billion, reflecting 15.47% year-over-year growth. The consensus mark for 2025 earnings is pegged at $26.06 per share, unchanged over the past 30 days. This indicates a 31.42% increase from the previous year.

Netflix, Inc. Price and Consensus

Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote

NFLX stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research