Netflix's Ad and Gaming Push Faces Investor Scrutiny as Growth Accelerates

Netflix's soaring stock performance in 2025—adding $120 billion in value—now faces a real test.

On Tuesday, the company will release its third-quarter earnings, and investors are watching closely to see if its big investments in advertising and video games are actually paying off.

Analysts expect a strong showing: revenue is forecast to jump 17.2% to $11.51 billion, while profit is set to rise 27% to $3.01 billion.

Netflix is counting on hits like "KPop Demon Hunters," the "Wednesday sequel," and the final season of "Stranger Things" to keep subscribers watching and revenue growing.

But behind the strong numbers are concerns. Netflix has stopped sharing subscriber counts, asking Wall Street to focus more on profit.

That move has some investors worried growth may be slowing, especially as Netflix bets big on two newer businesses: ads and video games.

The ad-supported tier, now with about 94 million users, is gaining traction, making up more than half of new sign-ups. But its revenue impact is still modest.

According to Reuters, analysts estimate the tier brought in around $662.3 million in Q3.

Netflix has also been experimenting with advanced ad technology, using AI to place interactive ads directly into shows—something not seen on rival platforms.

Netflix Gaming Adds Less Than 1% to User Activity

Gaming, however, is where Netflix's strategy gets tricky. The company has spent roughly $1 billion buying game studios and now offers over 120 mobile games, including titles based on its own shows like "Squid Game: Unleashed."

But so far, that investment hasn't moved the needle much. A study from research firm Omdia shows games have added less than 0.5% to total user engagement after four years.

Co-CEO Greg Peters compared the effort to Netflix's early struggles in Japan: "It took us a long time... the gaming situation is not dissimilar to that," he said earlier this month.

Still, Netflix isn't alone in the challenge. Even other major players like Disney and Amazon—both highlighted alongside Netflix in Zacks Investment Ideas this week—are exploring new digital strategies to drive future growth, Yahoo said.

According to Zacks, Netflix is projected to earn $6.89 per share in Q3, up from $5.40 last year. Analysts remain cautiously optimistic, with price targets ranging from $800 to $1,600 per share.

Zacks currently ranks Netflix as a #3 (Hold), noting steady earnings expectations but no major upward momentum—yet.

Originally published on vcpost.com