“Gen AI is scaling quickly across the entire creative process, from concept to pre-vis through post and delivery,” according to Netflix co-CEO Ted Sarandos. AI featured prominently in Netflix’s earnings call as executives outlined how the company is changing the way it produces content, expands into new entertainment formats and grows its gaming business. During the Q2 2026 earnings call, executives answered analysts’ questions on the company’s strategy, including the rollout of generative AI tools following its acquisition of InterPositive, the performance of its cloud gaming business, the evolution of its content offering, and experiments with free products and trials.

AI to become a bigger part of content production: Sarandos said the company’s acquisition of InterPositive was beginning to show results, but stressed that it formed only one part of Netflix’s broader AI strategy alongside internal teams such as Eyeline and its animation lab. He said a growing number of productions were now deploying these technologies.

According to him, creators have already used AI workflows across around 300 titles, particularly during post-production, and are increasingly using the technology for complex visual effects, including crowd enhancement and historical battle scenes.

Sarandos also cited Netflix’s documentary series ‘American Experiment’, which contains 17 minutes of AI-enhanced footage. He said those sequences were produced “twice as fast and at half the cost of previous options“, allowing productions to include scenes that previously would have been unaffordable.

However, Sarandos rejected the idea that AI would replace filmmakers. “It takes great artists to make something great, and AI is not changing that. AI will give creators better tools to bring their visions to life. Movies are being made by people who make movies. AI provides them with better tools to make them even better.”

Looking ahead, he said any efficiencies generated by AI would support further investment. “The cost savings will likely be reinvested into more content on the service,” he said.

Netflix doubles down on cloud gaming: Gaming emerged as another major focus of the earnings call, with Gregory Peters, Co-CEO of Netflix, describing it as a “$150 billion” opportunity outside China and Russia. He said the company was beginning to see evidence that its cloud-first gaming strategy was working.

According to Peters, “FIFA and Unhinged became our two most successful cloud game debuts,” while monthly active players for cloud games have increased 11-fold since Netflix expanded the initiative last October. He added that adoption was progressing faster than it had for Netflix’s earlier mobile gaming business, with stronger retention among users.

Netflix also highlighted rapid growth in children’s gaming. Peters said Netflix Playground, its dedicated children’s games app, had recorded threefold growth in daily players, while engagement with children’s mobile games had risen 600% year-on-year.

Despite the progress, Peters said gaming remained a relatively small investment compared with Netflix’s overall content budget. “We’re just getting started here. We’re scratching the surface in terms of what we think the total potential of the space offers for us,” he said. He added that the company would continue refining its investments based on member engagement and business returns rather than expanding indiscriminately.

Content strategy:

• Ted Sarandos said the early performance of video podcasts and vertical video clips encouraged Netflix, adding, “This viewing is definitely incremental for us“. He said podcasts were increasing daytime viewing and performing particularly well on mobile devices.
• Sarandos said Netflix would expand its entertainment offering through partnerships with publishers including Condé Nast, Hearst and People, while continuing to build its catalogue of creators such as Jay Shetty, Martha Stewart and Bill Simmons.
• Sarandos said the company’s broader strategy remained gradual rather than disruptive. “These expansions are evolutionary, not revolutionary,” he said, adding that Netflix would continue adding entertainment formats where it believed members would find value.

Netflix is experimenting with free tiers: Peters said Netflix was continuing to evaluate whether a free streaming tier could work in some markets but stressed that the company had no immediate plans to launch one. “Free is something that we’re going to continue to consider, but we have no near-term plans to launch something,” he said, adding that any such product would need to avoid cannibalising paid subscriptions and would need a sufficiently mature advertising business to support it.

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