Netflix, Inc.

Good afternoon and welcome to the Netflix Q1 2026 earnings interview. I'm Spencer Wong, VP of Finance and Capital Markets. Joining me today are co-CEOs Ted Sarandos and Greg Peters and CFO Spence Newman. As a reminder, we'll be making forward-looking statements and actual results may vary. We'll now take questions submitted by the analyst community and we'll begin on the topic of our results and outlook. The first question comes from Robert Fishman of Moffitt Nathanson. This question is, can you speak to your full year margin guidance and how it compares to prior guidance with the Warner Brothers deal costs? And beyond content spending, where else are you accelerating investment in 2026?

Perhaps I can kick this one off and just sort of step back and do a little bit of high-level framing. Of course, it's early in the year. There's still plenty of time to go, plenty of work left to go do. But we've seen really good progress so far in this first quarter that builds on the solid momentum and results from 2025. Given that, we are maintaining our guidance, our strong outlook for organic growth that we established for 2026. That's revenue growth of 12% to 14%, operating margin at 31.5%. That includes roughly doubling the advertising business to about $3 billion U.S. dollars. Now, we ended last year with more than 325 million paid members. And as that number continues to grow, we are entertaining an audience that is approaching a billion people, which is an exciting milestone to strive for and will be an exciting milestone to achieve. But even given that number, we still have plenty of room to grow into our addressable market. So if you look at it from an addressable household perspectives that have good data, that have a smart TV, all those things that we think are enabling, we're still under 45% penetrated in terms of that number. We think that number is roughly 800 million and it grows every year, obviously. We've captured about 7% of addressable revenue. This is countries and categories that we currently directly participate in. We now estimate that's 670 billion US dollars as of 2026. And that number grows, of course, year over year as well. And we estimate that we account for only 5% of TV view share globally. So you can pretty much use any measure and say we've got tons of room for growth still ahead of us.

Yeah, and I just add, Greg, looking ahead, we're focused on three big priorities. Number one, to deliver even more entertainment value for our members. And we do that by continuing to strengthen our core offering, series and films, originals and licensed. But we also are pushing into new categories that are really exciting, like our further expansion to podcast. We announced a few exciting new ones just today. We're adding more regional live sports events. like the incredible event we just did in Japan with World Baseball Classic, and we're growing our games offering, including a brand new kids gaming app. Number two, we're leveraging technology to improve the service, from how it's delivered to how to find great things to watch, and now even how content is created and produced. And number three, we're improving monetization. And we're doing this through a combination of broad distribution, mostly organic, but also supplement with some great partners. We have increasingly sophisticated pricing and pricing plans. And we have a great and growing ad business, as Greg just said. These features help position us to deliver multi-year growth. We think beyond the 12% to 14% that we expect to deliver this year. You know, at Netflix, we kind of we embrace change. We thrive on competition. We stay focused on constant and consistent improvements, all the things that make us faster and better than the competition in whatever form the competition takes. So we really feel great about the business, about the organic growth opportunity ahead. And we are just as energized as ever to achieve our mission to entertain the world. Spence, maybe you could talk a second about the WB deal costs and the guide.