Summary: Netflix recently reported quarterly earnings that slightly missed expectations, leading to a 5.6% drop in its stock price. However, the company is ramping up its use of artificial intelligence (AI) across content creation, user experience, and advertising. Co-CEOs Ted Sarandos and Greg Peters emphasized AI’s growing role during the earnings call and shareholder letter, highlighting ongoing projects like conversational search, AI-assisted localization, and generative AI tools for creators. While Netflix remains cautious about some AI developments, it’s clear the company sees AI as a key part of its future.
Netflix’s Quarterly Earnings: A Mixed Bag
On Tuesday, Netflix announced its quarterly earnings, reporting revenue of $11.51 billion—just shy of Bloomberg’s forecast of $11.52 billion. Earnings per share came in at $5.87, below the estimated $6.94, according to Yahoo! Finance. While these numbers aren’t disastrous, they weren’t quite what investors hoped for, leading to a 5.6% drop in Netflix’s stock price.
AI Takes Center Stage in Netflix’s Strategy
Despite the earnings miss, Netflix’s co-CEOs Ted Sarandos and Greg Peters made it clear that artificial intelligence is a major focus moving forward. During both the shareholder letter and the earnings call, they highlighted generative AI as an exciting development that will impact content generation, user experience, and advertising. It felt like a throwback to the AI enthusiasm of 2023.
AI as a Top Priority
At 26 minutes and 34 seconds into the earnings call, Greg Peters listed six challenges Netflix faces, placing AI implementation second—right after creating TV and movies worldwide. This underscores how central AI has become to the company’s strategy.
How Netflix Is Using AI Today
Netflix’s shareholder letter revealed that machine learning and AI have been powering title recommendations, production, and promotion technologies for years. In fact, Netflix has been experimenting with machine learning since at least 2008, famously engaging the public to understand why some people enjoy movies like Napoleon Dynamite through mathematical analysis.
Today, Netflix is integrating AI features wherever possible. For example, a beta test is underway for a conversational search function designed to help users find the perfect title for any occasion. Imagine asking your Roku remote, “What’s a good movie to watch with my mom on her 50th birthday?” and receiving tailored recommendations.
On the technical side, Netflix is working to use AI to localize promotional assets—essentially translating and adapting marketing materials for different languages and regions. This could help bring lesser-known international movies and shows to viewers, even if artwork and summaries aren’t readily available in their language.
The Future of AI at Netflix
Netflix is also focused on empowering creators with a broad set of generative AI tools to help bring their visions to life. For instance, AI de-aging technology was used in Happy Gilmore 2, and the producers of Billionaires’ Bunker utilized generative AI for concept art.
Netflix’s Take on AI Challenges and Opportunities
When asked about Sora 2, a video generator that recently sparked controversy over copyright issues, Sarandos expressed that Netflix isn’t rushing to adopt AI in a way that compromises quality. He noted that Sora 2 is likely to impact user-generated content creators more in the near term, rather than established studios like Netflix.
Interestingly, Sarandos is already encouraging influencers to consider partnering with Netflix, suggesting that their current business models may be more vulnerable to AI disruption. However, he emphasized that AI doesn’t automatically make someone a great storyteller. Instead, Netflix is confident that AI will help both the company and its creative partners tell stories better, faster, and in new ways. As Sarandos put it, “We’re all in on that.”