For most of Netflix’s history, investors cared less about how much people watched than whether they signed up and stayed. On that score, Netflix has been the envy of streaming: Its customers rarely cancel.

But as streaming matures, keeping subscribers isn’t enough. Netflix’s growth increasingly hinges on advertising, which depends heavily on how much people watch. And lately, they haven’t been watching as much. That makes Netflix look less like a growth stock and more like a company waiting for its next hit.

That helps explain an odd split. By most of the numbers Netflix reports, the business is in great shape. Margins are on track for a record year, cash is pouring in and cancellations remain the lowest in the industry. Yet the stock has lost about half its value since peaking last year. Investors are watching different numbers: how much people watch and how fast the ad business is growing. The average Netflix subscriber watches about 9% less than three years ago, by Wells Fargo’s estimate, based on Netflix’s disclosures of viewing hours and the bank’s own subscriber estimates.

The irony is that Netflix invited this scrutiny. When it stopped reporting subscriber numbers last year, it told investors that engagement, meaning how much time members spend watching, was the best measure of customer satisfaction. Now that measure has stalled, and starting next year, Netflix plans to report it once a year rather than twice.

Netflix has dealt with slumps before. When it lost subscribers in 2022, it introduced a cheaper plan with commercials and cracked down on password sharing. The plan worked, and the stock came roaring back. With its price-to-forward-earnings multiple now back to its 2022 lows, bulls see a cheap stock and are expecting Netflix to find new levers to pull.

But the easy growth is gone. Management concedes that in mature markets such as the U.S., growth will now come mostly from higher prices and advertising. Wells Fargo expects advertising to account for more than a third of Netflix’s revenue growth next year. Yet Netflix just cut its 2026 ad-revenue forecast to about $2.7 billion from $3 billion. Management blamed delays in its ad technology. Whatever the cause, as Netflix becomes more of an ad business, viewing hours become more central to the story.

And those hours are getting harder to win. YouTube has become the biggest draw on American TV screens, with roughly twice Netflix’s share of U.S. viewing, according to Nielsen. Barclays analyst Kannan Venkateshwar argues the industry has moved from content scarcity to attention scarcity. Netflix can make more good shows, but each show is now competing with other streamers, free services, and an endless supply of short videos on TikTok and YouTube.

Netflix has options, but each comes at a price. It could show more ads per hour, since it runs far fewer than rivals. Netflix runs about 2.4 minutes of ads an hour versus roughly 8 at Hulu and Disney+, according to BMO Capital Markets analysts. But that would hurt the brand, explains Brian Wieser, chief executive of advertising consulting firm Madison and Wall. Netflix was supposed to replace TV, and more commercials risks annoying viewers, undercutting the aim of getting them to watch more.

The surest bet to get people to watch more is to spend more. But that hurts margins. (Its failed bid for Warner Bros. would have done much the same thing, at a much bigger scale.) Or Netflix could keep raising prices. But each increase nudges customers toward its $8.99-a-month ad plan, which earns less per member as long as ad sales lag.

Netflix’s response has been to shake up its content team, and better shows and movies will hopefully come. Next year brings the “Narnia” film and new seasons of “Bridgerton” and “Wednesday.”But a business that lives on hits is valued differently from one with a steadily expanding audience. Wells Fargo analyst Steven Cahall argues Netflix deserves the multiple of a hit-driven media company such as Disney, about 15 times earnings, and the stock already trades not far above that, at around 17.

Netflix isn’t Disney, though. It is the dominant streamer, and it may have more room to raise prices than investors think, argues Wieser. But growth that comes from charging the same households more every year is what cable companies did for decades. It can produce steady profits, but it rarely earns a growth-stock valuation. A multiple closer to 20 is a reasonable bull case. A return to the roughly 30 times Netflix fetched earlier this year, when investors still priced it like a tech darling, is not.

The bigger problem, says Needham analyst Laura Martin, is that Netflix still makes nearly all its money from a single business that has matured. Traditional media giants squeeze a hit through theaters, merchandise, theme parks and licensing. Netflix mostly just streams it. And she warns that artificial intelligence will let YouTube’s creators make better, longer videos for the same money, bringing them closer to competing with Netflix’s own.

Netflix has spent years proving that people will keep paying for it. The harder task now is proving they will keep watching.