21 hours ago
194
In its quarterly report issued on Thursday, Netflix managed to beat analysts’ forecasts on earnings per share but missed expectations for revenue, causing its share price to fall by 6% after hours, despite having risen by 30% over the past 12 months.
Nestled within the shareholder letter was the announcement that would determine how the content margins of Netflix would be measured for the remainder of 2026. The use of generative AI processes has been employed in nearly 300 films, with the majority being done during post-production.
Netflix named three projects that used GenAI to create “highly complex sequences”: Glory in India, Brasil 70: A Saga do Tri in Brazil, and The American Experiment in the US.
Netflix turns GenAI into production infrastructure
Netflix’s GenAI push runs on three internal systems that co-CEO Greg Peters said on the earnings call are working together. InterPositive, the $600 million acquisition Netflix closed in March 2026, sits at the center. The company was established in 2022 by Ben Affleck and creates artificial intelligence products that interact with the footage of the production rather than creating videos through text prompts.
It helps filmmakers with relighting shots, modifying visual effects, and managing editing tasks that usually demand manual efforts. Netflix also runs Eyeline, its visual effects research group, and a separate animation lab.
Peters told analysts the three systems are working in concert to drive production speed.
Sarandos defends against the labor concern
Ted Sarandos, co-CEO of Netflix, took the call as an opportunity to make a clear connection on the labor issue. According to him, Netflix is approaching the use of generative AI in a careful manner and the intention is to create works that otherwise could not be created due to budget constraints.
His specific example was The American Experiment, which, according to reports, delivered 17 minutes of AI-enhanced footage twice as fast and at half the cost of traditional methods. During the earnings call, Netflix avoided addressing the issue that has been asked since the Hollywood strike of 2023: will GenAI eventually replace animators and visual effects artists, even if it first acts as a tool for scoping?
As Cryptopolitan earlier reported, Sarandos told the Q3 2025 call that AI “can’t automatically make you a great storyteller if you’re not.”
Today’s 300-title figure is an order-of-magnitude jump from July 2025, when Netflix first confirmed generative AI use in a single production, the Argentine sci-fi series The Eternauts.
Netflix links AI use to production costs
Netflix’s Q2 came in at adjusted EPS of $0.80 against a $0.79 estimate, with revenue at $12.56 billion versus the $12.58 billion consensus. The company raised full-year guidance to $44.8 billion to $45.2 billion.
Ad revenue remains the growth story, tracking to roughly $3 billion in 2026, double the 2025 figure, with the advertiser base up 70% year-over-year past 4,000 clients. Netflix passed up an opportunity to buy Warner Bros. Discovery’s film and streaming assets last year, and reiterated on its most recent earnings call that it favors internal growth and small acquisitions over media consolidation deals.
The AI story is Netflix’s answer to a specific investor concern: how to maintain content margins while ramping ad growth. The 300-title figure and the American Experiment productivity claim are the closest Netflix has come to putting numbers on that answer.
If you're reading this, you’re already ahead. Stay there with our newsletter.
English (US)