NFLX 10-K & 10-Q changes, risk factors and insider trading

We must continually add new members both to replace canceled memberships and to grow our business beyond our current membership base. Our ability to continue to attract and retain members will depend in part on our ability to consistently provide our members in countries around the globe with compelling content choices that keep our members engaged with our service, effectively drive conversation around our content and service, as well as provide a quality experience for choosing and enjoying TV series, films and games. Our penetration and growth rates have fluctuated and vary across the jurisdictions where we provide our service. In countries where we have been operating for many years or where we are highly penetrated, our membership growth is slower than in newer or less penetrated countries. Furthermore, the relative service levels, content offerings, pricing and related features of competitors to our service may adversely impact our ability to attract and retain members. Competitors include other entertainment video providers, such as linear television, and streaming entertainment providers (including those that provide pirated content), video gaming providers, open content platform providers, which provide access to user-generated and professionally produced content, as well as user-generated content, some of which are by professional content creators, and more broadly against other sources of entertainment, such as social media, that our members could choose in their moments of free time.

Members cancel our service for many reasons, including a perception that they do not use the service sufficiently, that they need to cut household expenses, dissatisfaction with content, including any advertisements that may appear on our service, a preference for competitive services and customer service issues that they believe are not satisfactorily resolved. Membership growth is also impacted by seasonality, with the fourth quarter historically representing our greatest growth, as well as the timing of our content release schedules. Adverse macroeconomic conditions, including as a result of inflation, may also adversely impact our ability to attract and retain members. If we do not grow as expected, given, in particular, that our content costs are largely fixed in nature, we may not be able to adjust our expenditures or increase our (per membership) revenues, including by adjusting membership pricing, commensurate with the lowered growth rate such that our margins, liquidity and results of operations may be adversely impacted. If we are unable to successfully compete with current and new competitors in providing compelling content, retaining our existing members and attracting new members, our business will be adversely affected.

If consumers do not perceive our service offering to be of value, including if we introduce new or adjust existing features, adjust pricing or service offerings, or change the mix of content in a manner that is not favorably received by them, we may not be able to attract and retain members, and accordingly, our revenue and results of operations may be adversely affected. We expanded our entertainment video offering to include games and, more recently,and live programming. If our efforts to sustain and improve our existing TV and film offering, as well as develop and expand our video entertainment options, are not done in a manner valued by our current and future members, our ability to attract and retain members may be negatively impacted. We may also seek to extend our business into new products and services to help drive growth. For example, we continue to expand our offering of consumer products and live experiences. To the extent we cannot successfully find and develop new products, experiences and services to help drive growth, or we do not realize the expected benefits or generate additional revenue from such new products, experiences, and services, our future results of operations and growth may be adversely impacted.

The market for entertainment video is intensely competitive and subject to rapid change. Through new and existing distribution channels, consumers have increasing options to access entertainment video. The various economic models underlying these channels include subscription, which may be bundled with other services, transactional, ad-supported and piracy-based models. All of these have the potential to capture meaningful segments of the entertainment video market. We face competition from traditional providers of entertainment video, including broadcasters and cable network operators, as well as internet based e-commerce or entertainment video providers and platforms. Several of these competitors have long operating histories, large customer bases, strong brand recognition, exclusive rights to certain content, large content libraries, and significant financial, marketing and other resources. They may offer more compelling content or secure better terms from suppliers, adopt more aggressive pricing and devote more resources to product development, technology, infrastructure, content acquisitions and marketing. New entrants may enter the market or existing providers may adjust their services with unique offerings or approaches to providing entertainment video. In addition, new technological developments, including the development and use of generative artificial intelligence,AI, are rapidly evolving. If our competitors gain an advantage by using such technologies more effectively to satisfy consumer demand, our ability to compete successfully and our results of operations could be adversely impacted. Companies also may enter into business combinations or alliances that strengthen their competitive positions. Piracy also threatens to damage our business, as its fundamental proposition to consumers is so compelling and difficult to compete against: virtually all content for free. In light of the compelling consumer proposition, piracy services are subject to rapid global growth, and our efforts to prevent that growth may be insufficient. If we are unable to successfully or profitably compete with current and new competitors and win moments of truth, our business will be adversely affected, and we may not be able to increase or maintain market share, revenues or profitability.

If we fail to maintain a positive reputation concerning our service and the content we offer, including any advertisements, we may not be able to attract or retain members, we may face regulatory scrutiny and our operating results may be adversely affected.

We believe that a positive reputation concerning our service is important in attracting and retaining members. To the extent our contentcontent, including any advertisements that may appear on our service, is perceived as low quality, offensive or otherwise not compelling to consumers, our ability to establish and maintain a positive reputation may be adversely impacted. To the extent our contentcontent, including any advertisements, is deemed controversial or offensive by government regulators, we may face direct or indirect retaliatory action or behavior, including being required to remove such content from our service, our entire service could be banned and/or become subject to heightened regulatory scrutiny across our business and operations. We could also face consumer boycotts or cancellation campaigns, which could adversely affect our business. Furthermore, to the extent our response to government action or our marketing, customer service and public relations efforts are not effective or result in negative reaction, our ability to establish and maintain a positive reputation may likewise be adversely impacted. There is an increasinga focus from regulators, investors, members and other stakeholders on environmental, social, and governance (“ESG”) matters, both in the United States and internationally, including the adoption of new disclosure and regulatory frameworks. To the extent we are unable to meet regulatory or industry standards or investor expectations on ESG issues or the content we distribute and the manner in which we produce content creates ESG relatedESG-related concerns, our reputation may be harmed.

We may not be successful in overcoming such risks, and such acquisitions and investments may negatively impact our business. In addition, if we do not complete an announced acquisition transaction or integrate an acquired business successfully and in a timely manner, we may not realize the benefits of the acquisition to the extent anticipated. Acquisitions and investments may contribute to fluctuations in our quarterly financial results. These fluctuations could arise from transaction-related costs and charges associated with eliminating redundant expenses or write-offs of impaired assets recorded in connection with acquisitions and investments, and could negatively impact our financial results. See Risk Factors – “We have a substantial amount of indebtedness and other obligations, including streaming content obligations, which could adversely affect our financial position, and we may not be able to generate sufficient cash to service our debt and other obligations,” “The WBD transaction may not be completed on the currently contemplated timeline or terms, or at all,” and “The WBD transaction may cause our financial results to differ from expectations, we may not achieve the anticipated benefits of the WBD transaction, and the WBD transaction may disrupt our current plans or operations” for additional information.

We currently offer members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, TV set-top boxes and mobile devices. We have agreements with various cable, satellite and telecommunications operators to make our service available through the TV set-top boxes of these service providers, some of which compete directly with us or have investments in competing streaming content providers. In many instances, our agreements also include provisions by which the partner bills consumers directly for the Netflix service or otherwise offers services or products in connection with offering our service. If partners or other providers do a better job of connecting consumers with content they want to watch, for example through multi-service discovery interfaces,interfaces (including those powered by generative AI), our service may be adversely impacted. We intend to continue to broaden our relationships with existing partners and to increase our capability to stream content and offer games to other platforms and partners over time. If we are not successful in maintaining existing and creating new relationships, or if we encounter technological, content licensing, regulatory, business or other impediments to delivering our streaming content to our members via these devices, our ability to retain members and grow our business could be adversely impacted.

Our agreements with our partners are typically between one and three years in duration and our business could be adversely affected if, upon expiration, a number of our partners do not continue to provide access to our service or are unwilling to do so on terms acceptable to us, which terms may include the degree of accessibility and prominence of our service. Furthermore, devices are manufactured and sold by entities other than Netflix and while these entities should be responsible for the devices’ performance, the connection between these devices and our service may nonetheless result in consumer dissatisfaction toward us and such dissatisfaction could result in claims against us or otherwise adversely impact our business. In addition, technology changes to our streaming functionality may require that partners update their devices, and from time to time, lead to us to stop supporting the delivery of our service on certain legacy devices. If partners do not update or otherwise modify their devices, or if we discontinue support for certain devices, our service and our members' use and enjoyment could be negatively impacted.

Our members pay for our service using a variety of different payment methods, including credit and debit cards, gift cards, prepaid cards, direct debit, online wallets and direct carrier and partner billing. We rely on internal systems and those of third parties to process payment.payments. Acceptance and processing of these payment methods are subject to certain rules, regulations, and industry standards, including data storage requirements, additional authentication requirements for certain payment methods, and require payment of interchange and other fees. To the extent there are increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors, changes to rules, regulations or industry standards concerning payments, loss of payment partners and/or disruptions or failures in our payment processing systems, partner systems or payment products, including products we use to update payment information, our revenue, operating expenses and results of operations could be adversely impacted. In certain instances, we leverage third parties such as our cable and other partners to bill members on our behalf. If these third parties become unwilling or unable to continue processing payments on our behalf, we would have to transition members or otherwise find alternative methods of collecting payments, which could adversely impact member acquisition and retention. In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our results of operations and if not adequately controlled and managed could create negative consumer perceptions of our service. If we are unable to maintain our fraud and chargeback rate at acceptable levels, card networks may impose fines, our card approval rate may be impacted and we may be subject to additional card authentication requirements. The termination of our ability to process payments on any major payment method would significantly impair our ability to operate our business.

The adoption or modification of laws or regulations relating to the internet or other areas of our business could limit or otherwise adversely affect the manner in which we currently conduct our business. As our service and others like us gain traction in international markets, governments are increasingly looking to introduce new or extend legacy regulations to these services, in particular those related to broadcast media and tax. For example, European law enables individual member states to impose levies and other financial obligations on media operators that provide services in their jurisdiction. Several European Union (EU) Member States have and others may, over time, impose financial and regulatory obligations on us. In addition, the continued growth and development of the market for online commerce may lead to more stringent consumer protection laws, which may impose additional burdens on us. Rules governing new technological developments, including generative artificial intelligence,AI, are nascent and rapidly evolving such that the impact on areas related to our business remains uncertain. For example, in Europe, the Digital Markets Act remains subject to non-compliance investigations, the result of which could change how we interact with digital gatekeepers like Apple and Google. If we are required to comply with new regulations or legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur additional expenses or alter our business model. Additionally, ongoing enforcement of the Digital Markets Act in the EU and similar regulations in other territories, such as Japan, could change how we and other app developers interact with digital gatekeepers, such as Apple and Google, although we are not in scope of these regulations.

Changes in laws or regulations that adversely affect the growth, popularity or use of the internet, including laws impacting net neutrality, requiring payment of network access fees or payment of network support taxes, could decrease the demand for our service and increase our cost of doing business. In July 2025, in an important joint statement with the United States, the EU committed not to adopt or maintain such network usage fees, although the risk of de facto obligations remains in the EU and in certain other jurisdictions. Certain laws intended to prevent network operators from discriminating against the legal traffic that traverse their networks have been implemented in many countries, including across the EU and several U.S. states. In others, the laws may be nascent, evolving or non-existent. For example, in January 2025, a U.S. federal appeals court recently overturned the Federal Communications Commission's net neutrality rules. Given uncertainty around these rules, including changing interpretations, amendments or repeal, coupled with potentially significant political and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business.

Our advertising offering is new and subject to various risks and uncertainties, which may adversely affect our business.

•fluctuations in memberships,membership includingplan those selecting the ad-supported subscription plan,mix and member engagement;

•adverse legal developments relating to advertisingadvertising, targeting, or measurement tools;

•our ability to develop the technologytechnology, data, and related infrastructure to support advertising and drive value to advertisers;

Trademark, copyright, patent and other intellectual property rights are important to us and other companies. Our intellectual property rights extend to our technology, business processes, the content we produce and distribute through our service, and consumer products, experiences, and marketing assets based thereon. We use the intellectual property of third parties in creating some of our content, merchandising our products and experiences, and marketing our service. From time to time, third parties allege that we have infringed or otherwise violated their intellectual property rights. If we are unable to obtain sufficient rights, successfully defend our use, or develop non-infringing technology or otherwise alter our business practices on a timely basis in response to claims against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, our business and competitive position may be adversely affected. In addition, the use or adoption of new and emerging technologies may increase our exposure to intellectual property claims,claims. For example, the development and use of generative AI tools remain subject to uncertain legal frameworks, and the availability of copyright and other intellectual property protection for AI-generated material is uncertain. Many companies are devoting significant resources to developing patents that could potentially affect many aspects of our business. There are numerous patents that broadly claim means and methods of conducting business on the internet. We have not searched for patents relative to our technology. Defending ourselves against intellectual property claims, whether they are with or without merit or are determined in our favor, results in costly litigation and diversion of technical and management personnel. It also may result in our inability to use our current technology and products, our recommendation and merchandising technology or inability to market our service or merchandise our products. We may also have to remove content from our service, or remove consumer products or marketing materials from the marketplace. As a result of a dispute, we may have to develop non-infringing technology, enter into royalty or licensing agreements, adjust our content, merchandising or marketing activities or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us.

Our computer systems and those of third parties we use in our operations are subject to constantly evolving cybersecurity threats, including cyber-attacks such as computer viruses, malware, ransomware, denial of service attacks, physical or electronic break-ins, or insider threats, as well as misconfigurations in information systems, networks, software or hardware, and similar disruptions or errors. These systems and those of third parties with which we do business have experienced and may continue to experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse or theft of personal information (of third parties, employees, and our members) and other data, confidential information or intellectual property. We and many of the third parties we work with rely on open source software and libraries that are integrated into a variety of applications, tools and systems, which may increase our exposure to vulnerabilities. The addition of new features or upgrades also increases our exposure to vulnerabilities, and generative artificial intelligenceAI could intensify these cybersecurity risks. Additionally, outside parties may attempt to induce employees, vendors, partners, or users to disclose sensitive or confidential information in order to gain access to data. Any attempt by hackers to obtain our data (including member and corporate information) or intellectual property (including digital content assets), disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could harm our business, be expensive to remedy and damage our reputation. We have implemented certain systems and processes to thwart hackers and protect our data and systems. However, the techniques used to gain unauthorized access to data and software are constantly evolving, and we may be unable to anticipate, detect or prevent unauthorized access or address all cybersecurity incidents that occur. Because of our prominence, we (and/or third parties we use) have been and may continue to be a particularly attractive target for such attacks, and from time to time, we have experienced unauthorized releases of certain digital content assets and unintended disclosure of personal information due to incidents related to third parties. However, to date these unauthorized releases have not had a material impact on our service, systems or business. There is no assurance that hackers may not have a material impact on our service or systems in the future. We do not carry insurance to cover expenses related to such disruptions or unauthorized access. Efforts to prevent hackers from disrupting our service or otherwise accessing our systems are expensive to develop, implement and maintain. These efforts require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated, and may limit the functionality of or otherwise negatively impact our service offering and systems. Any significant disruption to our service or access to our systems could result in a loss of members, damage our reputation, and adversely affect our business and results of operations. Further, a penetration of our systems or a third-party’s systems or other misappropriation or misuse of personal information could subject us to business, regulatory, litigation and reputation risk, which could have a negative effect on our business, financial condition and results of operations.

Amazon Web Services (“AWS”) provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a "“cloud"” computing service. We have architected our software and computer systems so as to utilize data processing, storage capabilities and other services provided by AWS. Currently, we run the vast majority of our computing on AWS. Given this, along with the fact that we cannot easily switch our AWS operations to another cloud provider, any commercial disputes related to, disruption of or interference with our use of AWS would impact our operations and our business would be adversely impacted. While the retail side of Amazon competes with us, we do not believe that Amazon will use the AWS operation in such a manner as to gain competitive advantage against our service, although if it were to do so it could harm our business.

We utilize a combination of proprietary and third-party technology to operate our business. This includes the technology that we have developed to recommend and merchandise content to our consumers as well as enable fast and efficient delivery of content to our members and their various consumer electronic devices. For example, we have built and deployed our own CDN. To the extent Internet Service Providers (“ISPs”) do not interconnect with our CDN or charge us to access their networks, or if we experience difficulties in our CDN’s operation, our ability to efficiently and effectively deliver our streaming content to our members could be adversely impacted and our business and results of operations could be adversely affected. Likewise, if our recommendation and merchandising technology does not enable us to predict and recommend titles that our members will enjoy,enjoy or our competitors' technology provides a better experience to consumers, our ability to attract and retain members may be adversely affected. We also utilize third-party technology to help market our service, process payments, and otherwise manage the daily operations of our business. If our technology or that of third-parties we utilize in our operations fails or otherwise operates improperly, including as a result of “bugs” or other errors in our development and deployment of software, our ability to operate our service, retain existing members and add new members may be impaired. Any harm to our members’ devices caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition.

We have a substantial amount of indebtedness and other obligations, including streaming content obligations. Moreover, we may incur additional indebtedness in the future and incur other obligations, including any additional streaming content obligations. Our ability to make payments on our debt and other obligations will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. If we are unable to service our debt and other obligations from cash flows, we may need to refinance or restructure all or a portion of such obligations prior to maturity. If the financial markets become difficult or costly to access, including due to rising interest rates, fluctuations in foreign currency exchange rates or other changes in economic conditions, our ability to raise additional capital may be negatively impacted, and any refinancing or restructuring could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

•negative impacts from trade disputes and evolving trade policy; and

Tax laws are regularly being re-examined and evaluated globally. New laws and interpretations of the law are taken into account for financial statement purposes in the quarter or year that they become applicable. Tax authorities are increasingly scrutinizing the tax positions of companies and we have tax audits pending in severala number of jurisdictions. The U.S. federal and state governments, countries in the EU, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in jurisdictions where we do business. If U.S. or other tax authorities change applicable tax laws or successfully challenge how or where our profits are currently recognized, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted.

We and our partners, suppliers, and vendors engage writers, directors, actors, other talent, trade employees and others who are subject to collective bargaining agreements in the motion picture industry, both in the U.S. and internationally. ExpiringAdditionally, the major U.S. guild collective bargaining agreements to which the Company is a signatory each expire in 2026, with the Writers Guild of America (“WGA”) agreement expiring on May 1, 2026, and the Screen Actors Guild – American Federation of Television and Radio Artists (“SAG-AFTRA”) and Directors Guild of America (“DGA”) agreements both expiring on June 30, 2026. These and other expiring collective bargaining agreements may be renewed on terms that are unfavorable to us. IfFurthermore, if expiring collective bargaining agreements cannot be renewed, affected unions have, and could in the future, take action in the form of strikes or work stoppages. Such work stoppages have resulted, and may in the future result, in halted productions and delays in our ability to provide new content to our members. Such actions, as well as higher costs or operating complexities in connection with these collective bargaining agreements or a significant labor dispute, could have an adverse effect on our business by causing delays in production, added costs or by reducing profit margins, and our ability to provide new content to our members could likewise be delayed or dropped.

•announcements of developments affecting our business, including mergers and acquisitions, such as the WBD transaction, systems or expansion plans by us or others;

Given the dynamic nature of our business, and the inherent limitations in predicting the future, forecasts of our revenues, operating margins, net incomeincome, cash flow, and other financial and operating data may differ materially from actual results. Also, predicting consumer adoption of various pricing strategies, such as the ad-supported subscription plan or efforts to limit multi-household usage, and new revenue streams, such as advertising revenue, is inherently difficult given the lack of operating history with respect to such offerings, and actual results may differ significantly from the expectations of our management, securities analysts or investors. Such discrepancies could cause a decline in the trading price of our common stock. In addition, the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America also requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. We base such estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, but actual results may differ from these estimates. For example, we estimate the content amortization pattern, beginning with the month of first availability, of any particular licensed or produced television series, documentary or feature film based upon various factors including historical and estimated viewing patterns. If actual viewing patterns differ from these estimates, the pattern and/or period of amortization would be changed and could affect the timing or recognition of content amortization. If we revise such estimates it could result in greater in-period expenses, which could cause us to miss our earnings guidance or negatively impact the results we report which could negatively impact our stock price. Further, events outside of our control may cause actual results to differ from our forecast.

The following represents our consolidated performance highlights(1):

Operating margin for the year ended December 31, 20242025 increased sixby approximately three percentage points as compared to the prior comparative period, primarily duedriven toby the growth in revenues growing at a faster rate as compared tooutpacing the growth in cost of revenues, sales and marketing, and technology and development expenses, coupled with lower general and administrative expenses.

Streaming Revenues

We also earn revenue from advertisements presented on our streaming service, consumer products, live eventsexperiences and various other sources. Revenues earned from sources other than monthly membership fees were not a material component of streaming revenues for the years ended December 31, 2025, 2024, 2023, and 2022.2023.

Streaming revenuesRevenues for the year ended December 31, 20242025 increased 16% as compared to the year ended December 31, 2023,2024, primarily due to the growth in average paying memberships andmemberships, price increases, and increased advertising revenue, partially offset by unfavorable changes in foreign exchange rates.rates, net of hedging.

The following tablestable summarizesummarizes streaming revenues and other streaming membership information by region for the years ended December 31, 2024,2025, 20232024 and 2022.2023. HedgingTotal streaming revenues are inclusive of hedging gains (losses) of $(91) million and $124 million are included in “Streaming revenues” for the yearyears ended December 31, 2024.2025 and 2024, respectively. No hedging gains and losses were recognized asin “Streamingtotal streaming revenues” infor the comparative prior year periods.ended December 31, 2023. See Note 78 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

Expenses related to the acquisition, licensing and production of content not included in content amortization may include payroll, stock-based compensation, facilities, and other personnel-related expenses, costs associated with obtaining rights to music included in our content, overall deals with talent, miscellaneous production-related costs and participations and residuals. Streaming delivery costs are primarily related to our global content delivery network (“Open Connect”). We have built our own Open Connect network to help us efficiently stream a high volume of content to our members over the internet. Delivery expenses, therefore, include equipment costs related to Open Connect, payroll and related personnel expenses and all third-party costs, such as cloud computing costs, associated with delivering content over the internet. Other operating costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs directly incurred in making our content available to members.

The increase in cost of revenues for the year ended December 31, 20242025 as compared to the year ended December 31, 20232024 was primarily due to a $1,104$1,121 million increase in content amortization relating to our existing and new content.content, coupled with a $1,116 million increase in other cost of revenues, primarily driven by non-income tax assessments in Brazil. We do not expect that non-income taxes incurred in Brazil will materially impact our results of operations in future periods. See Note 9 Commitments and Contingencies in the accompanying notes to our consolidated financial statements for further detail on our non-income tax matters.

Sales and marketing expenses consist primarily of advertisingexpenses expensesfor promotional activities such as digital and television advertising, and certain payments made to marketing and advertising sales partners,partners. includingOur marketing partners include consumer electronics ("“CE"”) manufacturers, multichannel video programming distributors ("“MVPDs"”), mobile operators, and ISPs. MarketingOur expensesadvertising sales partners include promotionaladvertising activitiestechnology such as digitalproviders and televisionadvertising advertising.agencies. Sales and marketing expenses also include payroll, stock-based compensation, facilities, and other related expenses for personnel that support advertising sales and marketing activities.

The increase in sales and marketing expenses for the year ended December 31, 20242025 as compared to the year ended December 31, 20232024 was primarily driven by a $131$222 million increase in marketing expenses, coupled with a $149 million increase in personnel-related costs due to the growth in advertising sales headcount. Other sales and marketing expenses increased $129 million primarily due to a $54 million increase in marketing expenses due to the timing of marketing spend on our content slate, coupled with an increase in expenses incurred in connection with our advertising offering, including increased payments to advertising sales partners and other advertising distribution expenses.

Technology and development expenses consist primarily of payroll, stock-based compensation, facilities, and other related expenses for technology personnel responsible for making improvements to our service offerings, including testing, maintaining and modifying our user interface, our recommendations, merchandisingrecommendations and infrastructure. Technology and development expenses also include costs associated with general use computer hardware and software.

Interest expense consists primarily of the interest associated with our outstanding debt obligations,obligations includingand the amortization of debt issuance costs. See Note 67 Debt in the accompanying notes to our consolidated financial statements for further detail on our debt obligations.

Interest expense primarily consists of interest on our Notes of $718$716 million for the year ended December 31, 2024.2025. The increase in interest expense for the year ended December 31, 20242025 as compared to the year ended December 31, 20232024 was dueprimarily driven by higher amortization of debt issuance costs, including approximately $60 million related to thefinancing increasearrangements entered into in debt.connection with the WBD transaction. See Note 7 Debt for additional details regarding the financing arrangements associated with the WBD transaction.

Interest and other income (expense) increaseddecreased for the year ended December 31, 20242025, primarily due to foreign exchange losses of $18$123 million, net of the impacts of derivatives and hedging, compared to the losses of $293$18 million for the corresponding period in 2023.2024. In the year ended December 31, 2024,2025, the foreign exchange losses were primarily driven by the non-cash loss of $72 million from the remeasurement of our Senior Notes denominated in Euro, net of hedging impacts, coupled with the remeasurement of cash and content liability positions in currencies other than the functional currencies. The foreign exchange losses in the year ended December 31, 2024 were primarily driven by the remeasurement of cash and content liability positions in currencies other than the functional currencies, partially offset by a non-cash gain of $122 million, net of hedging impacts, from the remeasurement of our €5,170 million Senior Notes. The foreign exchange loss in the year ended December 31, 2023 was primarily driven by a non-cash loss of $176 million from the remeasurement of our Senior Notes denominated in euros,Euro, coupled with the remeasurementnet of cashhedging and content liability positions in currencies other than the functional currencies.impacts.

The increase in our effective tax rate for the year ended December 31, 2024 remained relatively flat2025, as compared to the year ended December 31, 2023.2024, is primarily due to a decrease in tax benefits associated with federal research and development tax credits as well as the growth in income before taxes exceeding the growth in excess tax benefits from stock-based compensation. See Note 1011 Income Taxes to the consolidated financial statements for further information regarding income taxes.

Cash, cash equivalents, restricted cash and short-term investments increaseddecreased $2,447$518 million in the year ended December 31, 20242025 primarily due to cash provided by operations, issuance of debt, and proceeds from issuance of common stock, partially offset by the repurchase of stock and repayment of debt.debt, partially offset by cash provided by operations.

Debt, net of debt issuance costs and discounts, increaseddecreased $1,040$1,120 million primarily due to theapproximately issuance of $1,800$1,833 million in additionalrepayments Seniorof Notes,debt, partially offset by the repayment upon maturity of the $400 million aggregate principal amount of our 5.750% Senior Notes and the remeasurement of our euro-denominatedEuro-denominated notes in the year ended December 31, 2024.2025. The amount of principal and interest on our outstanding notes due in the next twelve months is $2,487$1,690 million. As of December 31, 2024, no amounts had been borrowed under our $3 billion Revolving Credit Agreement. See Note 67 Debt in the accompanying notes to our consolidated financial statements.

In September 2023, the Board of Directors authorized the repurchase of up to $10 billion of our common stock, with no expiration date, and in December 2024, the Board of Directors increased the share repurchase authorization by an additional $15 billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may discontinue any repurchases of our common stock at any time without prior notice. In the fiscal year ended December 31, 2024,2025, the Company repurchased 9,861,93586,536,215 shares of common stock for an aggregate amount of $6,211$9.1 millionbillion (excluding the 1% excise tax on stock repurchases as a result of the Inflation Reduction Act of 2022). As of December 31, 2024,2025, $17.1$8.0 billion remains available for repurchases.

(3)Operating lease obligations are comprised of operating lease liabilities included in "“Accrued expenses and other liabilities"” and "“Other non-current liabilities"” on the Consolidated Balance Sheets, inclusive of imputed interest. Operating lease obligations also include additional obligations that are not reflected on the Consolidated Balance Sheets as they did not meet the criteria for recognition. As of December 31, 2024,2025, the Company has additional operating leases for real estate that have not yet commenced of $38 million which has been included above. The lease obligations associated with these leases were not material. See Note 5 Balance Sheet Components in the accompanying notes to our consolidated financial statements for further details regarding leases.

As of December 31, 2024,2025, we had gross unrecognized tax benefits of $432$566 million, of which $302$409 million was classified in “Other non-current liabilities"” in the Consolidated Balance Sheets. AtIn this time, an estimate of the range of reasonably possible adjustmentsaddition to the balancematerial ofcash unrecognizedrequirements taxsummarized benefitsin cannotthe betable made. In addition,above, we may be requiredexpect to pay deposits of approximately $800$700 million related to non-income tax assessments in Brazil as described further in Note 9 Commitments and Contingencies. During the year ended December 31, 2025, we also paid tax deposits of approximately $200 million related to certain direct and indirect taxes inthat the next twelve months, which are in excess ofexceeded our typicalregularly annualrecurring obligations.

Net cash provided by operating activities for the year ended December 31, 20242025 increased $87$2,788 million as compared to the year ended December 31, 2023,2024, primarily driven by a $3,304$2,270 million or 61%26% increase in net income,income anand a $1,646 million increase in adjustments for non-cash expenses, and favorable changes in working capital, partially offset by ana $705 million increase in payments for content assets. The payments for content assets increasedand $3,862 million, from $13,140$423 million toin $17,003unfavorable million,changes orin 29%.working capital.

Net cash provided by (used in) investing activities for the year ended December 31, 20242025 decreasedincreased $2,724$3,223 million as compared to the year ended December 31, 2023,2024, primarily due to therenet beingcash noinflows maturitiesof $1,747 million from maturities, sales and purchases of investments in the year ended December 31, 2024,2025 as compared to maturitiescash outflows of investments of $1,395$1,742 million in the year ended December 31, 2023, coupled with an increase infrom purchases of investments ofin $1,237the corresponding period in 2024, partially offset by a $249 million and an increase in purchases of property and equipment of $91 million.equipment.

We recognize content assets (licensed and produced) as "“Content assets, net"” on the Consolidated Balance Sheets. For licensed content, we capitalize the fee per title and record a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming. For produced content, we capitalize costs associated with the production, including development costs, direct costs and production overhead.overhead, as costs are incurred.

Based on factors including historical and estimated viewing patterns, we amortize the content assets (licensed and produced) in “Cost of revenues” on the Consolidated Statements of Operations over the shorter of each title's contractual window of availability oravailability, estimated period of use or ten years, beginning with the month of first availability. The amortization is on an accelerated basis, as we typically expect more upfront viewing, and film amortization is more accelerated than TV series amortization. On average, over 90% of a licensed or produced content asset is expected to be amortized within four years after its month of first availability. We review factors that impact the amortization of the content assets on a regular basis. Our estimates related to these factors require considerable management judgment.

In the normal course of business, we, or a third-party producing content on our behalf, may qualify for tax incentives through eligible spend on productions. The accounting for tax incentives is dependent on the particular type of incentive, including the nature of the benefit and the location the incentive is earned. In general, tax incentives are realized as cash receipts and may be received prior to or after a title launches on our service. Upon a title’s launch, anyAny amounts we are eligible for through qualified production spend but have not received, are recognized in “Other current assets” or “Other non-current assets” on the Consolidated Balance Sheets as receivables. Tax incentives are generally accounted for as a reduction to the cost basis of content assets (presented in “Content assets, net”) and reduce content amortization over the life of the title (as presented in “Cost of revenues”) on the Consolidated Statements of Operations.

Our business model is subscription based as opposed to a model generating revenues at a specific title level. Content assets (licensed and produced) are predominantly monetized as a group and therefore are reviewed in the aggregate at a group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that the fair value may be less than unamortized cost. To date, we have not identified any such event or changes in circumstances. If such changes are identified in the future, these aggregated content assets will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off.

Operating margin for the three months ended MarchJune 31,30, 2026 increaseddecreased by approximately one percentage point as compared to the prior comparative period. The increasedecrease in operating margin was primarily driven by revenue growth outpacing the growth in cost of revenues, partially offset by generaltechnology and administrative,development expenses and sales and marketing, and technology and developmentmarketing expenses growing at a faster rate relativethan to revenue growth.revenue.

Net income for the three months ended MarchJune 31,30, 2026 increased $2,392$276 million as compared to the prior comparative period, primarily driven by an increase in interest and other income (expense) due to a $2.8 billion termination fee received in connection with the termination of our agreement with Warner Bros. Discovery, Inc. (“WBD”) to acquire WBD’s streaming and studios businesses, including its film and television studios, HBO Max and HBO (such transaction, the “WBD transaction”). The increase in net income was additionally impacted by a $610$418 million increase in operating income, driven by a $1,707$1,481 million increase in revenues,revenues and partially offset by a $625$712 million increase in cost of revenues primarily due to an increase in content amortization,amortization. andThe impact of higher operating income was partially offset by a $941$161 million increase in the provision for income taxes.

We primarily derive revenues from monthly membership fees for services related to streaming content to our members. We offer a variety of streaming membership plans, the price of which varies by country and the features of the plan. As of MarchJune 31,30, 2026, pricing on our plans ranged from the U.S. dollar equivalent of $1 to $39$38 per month, and pricing on our extra member sub accounts ranged from the U.S. dollar equivalent of $2 to $10 per month. We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.

We also earn revenues from advertisements presented on our streaming service, consumer products and experiences, and various other sources. Revenues earned from sources other than monthly membership fees were not a material component of revenues for the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025.

Revenues for the three and six months ended MarchJune 31,30, 2026 increased 16%13% and 15% as compared to the three and six months ended MarchJune 31,30, 2025, respectively, primarily due to the growth in memberships, price increases, and increased advertising revenue. Additionally, revenues for the three and six months ended June 30, 2026 as compared to the same periods in 2025, were impacted by favorable changes in foreign exchange rates, net of hedging.

The following tabletables summarizessummarize revenues by region for the three and six months ended MarchJune 31,30, 2026 and 2025. Total revenues are inclusive of hedging gains (losses) of $(13348) million and $165$(180) million for the three and six months ended MarchJune 31,30, 20262026, respectively, and $(37) million and $127 million for the three and six months ended June 30, 2025, respectively. See Note 8 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

The tabletables below summarizessummarize constant currency revenues by region for the three and six months ended MarchJune 31,30, 2026 and the constant currency percentage change in revenues by region for the three and six months ended MarchJune 31,30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025:

The increase in general and administrative expenses was primarily due to ana $88$105 million increase in personnel-related costs and a $107 million increase in third-party expenses, driven by higher legal fees and transaction-related costs, including those associated with the WBD transaction. General and administrative expenses also increased due to a $79 million increase in personnel-related costs.

Interest expenseexpense, net of hedging impacts, primarily consisted of interest on our Notes of $176$175 million and $351 million for the three and six months ended MarchJune 31,30, 2026.2026, respectively. The increasedecrease in interest expense for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 was due to the lower average aggregate principal of our Notes outstanding. The increase in interest expense for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily driven by higher amortization of debt issuance costs, including approximately $85 million recognized in connection with the termination of financing arrangements associated with the WBD transaction.transaction in the first quarter of 2026. See Note 7 Debt for additional details regarding the termination of financing arrangements associated with the WBD transaction.

Interest and other income (expense) increased in the threesix months ended MarchJune 31,30, 2026, primarily due to a $2.8 billion termination fee received in connection with the termination of the WBD transaction.transaction in the first quarter of 2026. See Note 6 Acquisitions for further information.

The increase in the effective tax raterates for the three and six months ended MarchJune 31,30, 2026, as compared to the same periodperiods in 2025, was primarily due to a decrease in tax benefits associated with lower excess tax benefits on stock-based compensationcompensation. The increase in the effective tax rate for the six months ended June 30, 2026, as wellcompared asto the same period in 2025, was also impacted by lower foreign-derived income deduction relative to the growth in income before income taxes.

Cash, cash equivalents, restricted cash and short-term investments increased $3,228$64 million in the threesix months ended MarchJune 31,30, 2026, primarily due to cash provided by operations, which includes the receipt of a $2.8 billion termination fee in connection with the termination of the WBD transaction,transaction in the first quarter of 2026, partially offset by repurchases of stock and cash paid for acquisitions. See Note 6 Acquisitions for further information.

Debt, net of debt issuance costs and discounts, decreased $102$154 million primarily due to the remeasurement of our Euro-denominated notes in the threesix months ended MarchJune 31,30, 2026. The amount of principal and interest on our outstanding notes due in the next twelve months is $1,686$3,149 million. See Note 7 Debt in the accompanying notes to our consolidated financial statements.

On April 12, 2024, we entered into a five-year, $3 billion unsecured revolving credit facility that matures on April 12, 2029 (the “Revolving Credit Agreement”). In May 2025, we established a $3 billion commercial paper program (the “Commercial Paper Program”) under which we may issue short-term unsecured commercial paper notes. As of MarchJune 31,30, 2026, no amounts have been borrowed under the Revolving Credit Agreement or the Commercial Paper Program.

In SeptemberMarch 2023,2021, the Company’s Board of Directors authorized the repurchase of up to $10 billion of our common stock, with no expiration date, and in December 2024, the Board of Directors increased thea share repurchase authorizationprogram byfor anthe additionalCompany’s $15common billion, alsostock with no expiration date. The Board subsequently approved additional repurchase authorizations in September 2023 and December 2024, and most recently in April 2026, authorized the repurchase of an additional $25 billion of the Company’s common stock. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may discontinue any repurchases of our common stock at any time without prior notice. During the threesix months ended MarchJune 31,30, 2026, the Company repurchased 13,497,09866,431,786 shares of common stock for an aggregate amount of $1.3$5.9 billion.billion (excluding the 1% excise tax on stock repurchases as a result of the Inflation Reduction Act of 2022). As of MarchJune 31,30, 2026, $6.8$27.1 billion remains available for repurchases.

Our material cash requirements from known contractual and other obligations primarily relate to our content, debt and lease obligations. As of MarchJune 31,30, 2026, the expected timing of those payments are as follows:

(1)As of MarchJune 31,30, 2026, content obligations were comprised of $4.1$3.9 billion included in “Current content liabilities” and $1.6 billion of “Non-current content liabilities” on the Consolidated Balance Sheets and $18.5$19.6 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition.

The following tabletables summarizessummarize our cash flows:

Net cash provided by operating activities for the three months ended MarchJune 31,30, 2026 increaseddecreased $2,501$679 million as compared to the corresponding period in 2025, primarily driven by a $2,392 million or 83% increase in net income which was largely attributable to an increase in interest and other income (expense) due to a $2.8 billion termination fee received in connection with the termination of the WBD transaction, a $749$1,059 million increase in adjustmentspayments for non-cashcontent expenses,assets and $200$620 million in favorableunfavorable changes in working capital, partially offset by ana $841$724 million increase in paymentsadjustments for contentnon-cash assets.expenses Changesand a $276 million increase in workingnet capital includes $729 million of non-routine payments made during the current period in connection with non-income tax assessments in Brazil for prior tax periods, which were offset by favorable changes in other working capital balances.income.

Net cash used in investing activities for the three months ended MarchJune 31,30, 2026 increased $1,268$987 million as compared to the corresponding period in 2025, primarily due to athe net decreaseabsence of $614cash flows related to investments in the three months ended June 30, 2026 as compared to $961 million in net cash flowsinflows from maturities, sales and purchases of investments, coupled with net cash outflows for acquisitions for an aggregate amount of $586 millioninvestments in the threeprior monthscomparative ended March 31, 2026, as compared to no acquisition-related cash flows in the corresponding period in 2025.period. In addition, purchases of property and equipment increased $68$63 million in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025.

Net cash used in financing activities for the three months ended MarchJune 31,30, 2026 decreasedincreased $2,798$2,167 million as compared to the corresponding period in 2025, primarily driven by a $2,266$3,060 million decreaseincrease in repurchases of common stock, coupledpartially withoffset by no repayments of debt in the three months ended MarchJune 31,30, 2026, as compared to $800$1,033 million in repayments of debt in the corresponding period in 2025. In addition, proceeds from the issuance of common stock decreased $302 million in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.