Netflix’s Ad Tier Just Hit 250 Million Users and It’s Building an AI Animation Studio — Is NFLX a Buy at $90?

TradingKey - Netflix ad tier hits 250M MAUs, Q1 revenue +16% to $12.25B, 32.3% operating margin. INKubator AI animation studio announced. NFLX at $90, channel support. Targets $92–$97.

Netflix (NASDAQ: NFLX) was moving higher on a +3.28% rally, landing at $89.68. A key reason for this rally was Bank of America reiterating its conviction on the ad business. The catalyst for this confidence was Netflix revealing that its ad-supported subscription tier had crossed 250 million monthly active users across the globe. This number brings an earlier monetization date and solidifies the idea that the company has not been transitioning to an ad business, it just is an ad business. When you consider this number combined with its announcement of an AI animation studio called INKubator, the company starts to look like more than a streaming service.

250 Million Ad Tier Users: What Does This Actually Mean for Netflix’s Revenue Model

Netflix’s ad tier now has 250 million monthly active users around the world. This isn’t just another milestone, it changes the entire revenue outlook. Ads scale very differently from subscriptions in streaming. They scale with user engagement, CPM, and more precise data. This allows Netflix to monetize engagement at higher price points than ever.

250 million users makes Netflix the biggest TV commercial network of all-time, and arguably in the world, and it can monetize this audience based on demographics and behavior much better than any linear broadcaster. We’ve also seen the ad plan drive the bulk of Netflix’s growth recently, as subscribers in price-sensitive markets opt for this lower-cost plan.

We saw Netflix validate this revenue model this past quarter. It reported Q1 2026 results showing total revenue growth to ~$12.25B and 16% year-over-year; it also saw a boost to its Q1 operating income (+18%), and Q1 margin expanded to 32.3%, one of the best margins in all of media. A one-time $2.8 billion termination fee related to a Warner Bros. Discovery transaction contributed to the Q1 numbers. But it was able to raise its full-year guidance modestly and call-out growth in Japan and elsewhere. 

Netflix now forecasts revenue growth of 12% to 14% for the year and margins around 31.5%. It’s getting strong analyst support. Jefferies, Bernstein, and JPMorgan have all maintained Buy ratings with price targets that cluster between $100 and $115.

Inkubator: Why Netflix’s AI Animation Studio Is More Than a Cost Control Measure

Netflix has just announced INKubator, its AI animation studio. It’s a cost saving measure, sure.

But animation is more cost-efficient per episode and easier to export across the globe in terms of language. And it’s more family-friendly and lower cost to produce once the world is built and characters are developed. So, Netflix had a decision to make.

This isn’t the first time we’ve seen Netflix pivot to AI to help make its content cheaper. AI-powered recommendation engines are the foundation of Netflix’s entire content discovery stack. This determines the most important thing Netflix has control over, what 300 million-plus people will watch in a typical night. Better content discovery reduces churn and increases total hours viewed, both of which are key factors in the ad business.

While this isn’t a new strategy, it’s worth noting that Netflix’s decade-plus of massive data and user behavior information on 300 million-plus users is one of the many reasons that no one has been able to match its ad business so far.

And while this isn’t mentioned in the INKubator news release, Netflix also bought rights to add additional NFL games to its live sports portfolio. This extends its live content beyond its Christmas Day experiment. Live sports also commands the highest CPM rates in the entire streaming world and arguably the lowest churn, as fans will not abandon their team. For a business that now has a hybrid subscription-ad business model, this seems like the best way to improve both advertiser pricing power and reduce subscriber churn at the same time.

Nflx Technical Analysis: $88 to $89 Channel Support and Rsi Positive Divergence

On the 4H timeframe, NFLX is re-testing the bottom of the channel with a bullish hammer and is also sitting right on the red MA below at $88.86 to $89.65. It’s in a blue descending channel that started from the highs at $97.62. The blue MA at $86.67 to $88.89 also provides support below. 

NFLX Price Chart - Source: Tradingview

The RSI at 48 is neutral and at 63 has a slight bullish divergence on the dip as the base has been formed at $81.72 and we are seeing higher lows in terms of structure. Resistance levels sit at $90.50 to $92.32, then $93.90, and finally at $97.62. 

As long as NFLX holds at least $88.80 the bullish bias remains in place, but a drop below would then target $86.67.

TRADE SETUP

• Entry: Long above $90.00, channel bottom holds
• Target 1: $92.32, mid-channel resistance
• Target 2: $93.90, next extension level
• Target 3: $97.62, upper channel resistance
• Stop loss: Daily close below $88.80, channel support fails

So, Why Was NFLX Trading Higher May 18? 

NFLX traded higher 18-May by more than 3% after Bank of America reiterated its positive thesis on Netflix advertising, specifically that the ad-supported subscription tier has now grown to over 250 million MAU around the world. This represents the speed at which revenue is being transformed from a solely subscriber-driven business model to one that includes a hybrid subscriber-plus-advertising model. The advertising tier continues to be the main source of new subscriber acquisitions globally, especially in the more price-sensitive overseas regions, and the sheer number of advertising-tier users means Netflix is now among the largest advertising networks in the world by total addressable audience.

So What Is Netflix Inkubator AI Animation Studio?

INKubator is Netflix's in-house AI animation studio, launched in May 2026, built to scale up the speed of animation production while minimizing expenses via AI-facilitated workflows. Animation is one of the most globally adaptable content assets and has been consistently one of Netflix's least developed content types in its first-run library compared to live-action content. By reducing the cost barrier of producing animations with AI tools, Netflix will now be able to make more animation content, at lower prices, with a larger variety of artistic styles and target audiences than before. The studio also illustrates Netflix's more comprehensive strategic use of artificial intelligence within its recommendation and personalization engine as well as its content discovery and search tools.

Is Netflix stock a buy now at $90 in May 2026?

The technical picture is positive. NFLX is setting up a bullish hammer on the downside of the downward trend channel, near $88.86-$89.65, with the relative strength index (RSI) in neutral territory and exhibiting positive divergence. A long trade above $90 would target $92.32, $93.90, and $97.62, with a protective stop below $88.80. Fundamentally, first quarter results delivered 16% YoY revenue growth, 32.3% operating profit margins, a total of 250 million advertising-tier users and a consensus stock price target range of $100-$115 set by analysts at Jefferies, Bernstein, and JPMorgan, all of which gives credence to a bullish view. The next real hard catalyst will be second quarter earnings results in late July, with key focus on the monetization potential of the advertising-tier subscription model and any new partnerships announced around live sports or content.

In Conclusion

Netflix at $90 is a very different business than what existed just three years earlier. The advertising-subscription model has 250 million paying subscribers. INKubator is a new toolset that will allow Netflix to increase animation output and decrease costs per title. Live sports programming will mean higher advertising rates and reduced customer attrition. Artificial intelligence-driven personalized content will strengthen the brand experience. First-quarter operating profit margins of 32.3% show that the new business model is actually profitable. 

Technicals show a bullish hammer forming on channel support with bullish RSI divergence, which gives a reason to go long above $90 with profit targets at $92.32 and $93.90. Analysts at major Wall Street firms see a price range of $100-$115 as reasonable. Next catalyst is Q2 earnings later this July. Until then, key focus is on the growth in the advertising-tier subscriber count and any new live sports rights deals.