Netflix (NFLX) is seeing its advertising business become a stronger growth driver despite concerns over slowing user engagement, with advertising revenue remaining on track to roughly double in 2026 to about $3 billion, Wedbush analysts said in a Monday note.

The firm said higher advertising load, improved targeting following Netflix's transition to its in-house advertising platform and premium pricing for live sports inventory continue to support advertising revenue growth.

Wedbush's latest US survey found the advertising-supported tier became stickier than premium plans for the first time, with subscribers showing higher intent to remain on the service.

The firm also said March price increases appear to have caused only light churn in Q2, which should be more than offset by higher average revenue per member and continued improvements in Netflix's advertising strategy.

The note said viewing hours per subscriber have softened as users spend more time on YouTube, social media and free ad-supported platforms. Wedbush said Netflix is responding by expanding into short-form video, podcasts and creator programming.

Wedbush maintained its outperform rating on Netflix and its $118 price target.

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