Having clearly dominated the first phase of the Streaming Wars, the key question now is, where does Netflix head next?

Following the release of its quarterly earnings, Netflix shares dropped about $20, roughly 1.5%, in after-hours trading. Still, over the past year, the company’s stock has surged an impressive 128%, currently trading at around $1,253 per share.

Laura Martin, senior analyst at Needham & Co., who has a $1,500 price target for Netflix, mentioned on CNBC before the earnings call that Wall Street is closely watching two main issues: how much Netflix plans to spend on content and whether that spending will include more live sports rights.

Martin noted that investors wouldn’t mind if Netflix increased its content budget to $18 billion annually. “The key question is where live sports fits into that,” she said.

This is a central topic. Netflix executives have consistently said in past earnings calls that they expect to spend around $17 billion annually on global content. During Thursday’s Q&A with analysts, executives reiterated that figure, though some hinted that this year’s total might be closer to $16 billion.

Robert Fishman of MoffettNathanson asked about Netflix’s strategy for acquiring sports rights, especially with Apple TV reportedly securing Formula 1’s streaming rights for about $150 million per year.

Ted Sarandos, Co-CEO of Netflix, responded, “Sports are a part of our live events strategy. We focus on big, ownable, breakthrough moments.”

This includes another year of airing two NFL games on Christmas Day, the Screen Actors Guild Awards, weekly WWE Smackdown shows, and various combat sports events and exhibitions.

Sarandos added that these deals “must make economic sense.” That comment may imply that the $150 million annual price tag for F1 rights is too high. Current rights holder Disney/ESPN had reportedly offered around $100 million but couldn’t match Apple’s financial firepower.

While live sports and events accounted for only about 200 billion viewing hours—relatively small in Netflix’s massive data set—Sarandos argued that not all viewing hours are equal. Live content boosts audience engagement and watch time, and may help reduce churn, a growing challenge across the streaming industry.

Looking ahead, Sarandos expressed confidence that Netflix can drive stronger viewership growth in the second half of 2025 after seeing only 1% growth in viewing time during the first half. The 2025 content lineup is heavily back-loaded, including new seasons of hits like Stranger Things and Wednesday, plus the final season of Squid Game, already released and widely viewed.

The Duffer Brothers, creators of Stranger Things, have a new series in the works, and Oscar-winning filmmaker Greta Gerwig is adapting The Chronicles of Narnia. Other anticipated titles include more seasons of Enola Holmes, One Piece, The Last Avatar, Lupin, and Berlin.

“We can grow with big hits, but that only accelerates growth by about 1%,” Sarandos explained. “It’s the consistent flow of shows and films—and soon games—that really matters. We had 44 shows nominated for Emmys this year. That’s what high-quality content at scale looks like.”

Over the past year, Netflix has raised prices on its top-tier subscription globally, increasing revenue without significantly affecting its ultra-low churn rate of about 2%.

ForbesNetflix Earnings Beat Expectations In Second Quarter, Boosting Revenue 16%By Toni FitzgeraldMartin also pointed out that investors are curious about how Netflix is using generative AI tools with its vast data resources. This is a concern for all tech companies—and many others outside the tech sector. Complicating matters are Hollywood labor contracts that restrict the use of AI in many creative areas.

However, those restrictions don’t apply to productions outside the U.S. Sarandos cited a small production from Argentina that wanted to show a collapsing building. Traditional visual effects would have been too expensive, but the team used AI tools developed by Eyeline, Netflix’s internal visual effects innovation group.

“The cost would have been prohibitive for that budget,” Sarandos said, “but with AI, it was done 10 times faster and at a much lower cost—and it worked for both the creators and the audience. More importantly, viewers loved it. AI opens up more possibilities on screen.”

Even with U.S. productions bound by union contracts, AI is still being used in other areas—such as better ad targeting, more personalized show recommendations, and tailored thumbnails and trailers that highlight elements likely to appeal to specific viewers, according to Co-CEO Greg Peters.

Netflix has been in the personalization and recommendation business for two decades, Peters said, but AI enhances that capability—especially with features like natural-language search, which lets users more precisely find what they want to watch.

“We see AI as a force multiplier,” Peters said. “We believe our data and scale give us a real edge in this area.”

Martin also noted that for many investors, Walt Disney Co. might be a safer bet as AI enables broader, more democratized content creation. Disney benefits from having significant revenue from its theme parks and other physical assets that AI can’t replicate.

Until recently, Netflix hadn’t invested in live sports or event-based content for its streaming platform. That’s changing quickly.

Its content budget also doesn’t include traditional theatrical releases, broadcast, or cable spending—areas that traditional media companies have relied on for years, but which are now declining.

As a result, one thing is nearly certain: Netflix won’t pursue a major acquisition of a legacy Hollywood studio to drive its next phase of growth.

Major studios like Comcast’s NBCUniversal and Warner Bros. Discovery are spinning off their declining cable assets, while Paramount is being acquired by Skydance for $8 billion, and Lionsgate has spun off its Starz streaming service.

Spencer Neumann, Netflix’s CFO, said, “We agree that consolidation is likely to continue. But we don’t think it will significantly shift the competitive landscape.”

Neumann added, “We have no interest in acquiring legacy media networks.” When evaluating potential acquisitions, Netflix looks at the opportunity cost.

In a complex regulatory environment, acquisitions could distract from other uses of capital, such as funding more original programming or returning money to shareholders through buybacks.

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