That will mean making major changes to the business. Netflix, partnering with Microsoft, is racing to develop a new lower-priced option that will be supported by ads, an attempt to scoop up customers that are watching their wallets as inflation bites. It's expected to launch early next year.

It's also looking at clamping down on password sharing. The company estimated that 100 million households use Netflix but aren't paying for it directly.

"We know this will be a change for our members," it told shareholders. "Our goal is to find an easy-to-use paid sharing offering that we believe works for our members and our business that we can roll out in 2023."

Rich Greenfield, an analyst at LightShed Partners, thinks there's significant room for Netflix's pivot to advertising to be a success.

"Netflix's advertising opportunity is REAL and directly tied to its enormous time spent vs. all other streaming services," he tweeted.