Netflix Earnings And New Proposal To Buy WB

Netflix announced outstanding quarterly earnings, beating expectations in almost every area…

…and yet, its stock collapsed in after hours trading, falling by nearly 5.5%.

QUARTERLY EARNINGS

For the last quarter of 2025, Netflix reported revenue of $12.05 billion versus $11.97 billion expected by analysts. Earnings per share came in at $0.56, also above forecasts of $0.55.

Net income reached $2.42 billion, up 29% year over year, while operating income rose 30% to $2.96 billion. Operating margin came in at 24.5%.

The company announced it now has 325 million subscribers globally, an impressive figure considering that until a year ago it had stopped regularly publishing subscriber numbers. At the same time, viewing hours in the second half of 2025 exceeded 96 billion hours. Put differently, nearly 1 billion people watched content on Netflix during that same six month period. A staggering number.

There was also a major increase in advertising revenue, which surpassed $1.5 billion, about 2.5 times higher than in 2024. It is worth remembering that Netflix’s ad supported plan is still relatively new, having launched only at the end of 2022, and yet it already appears to be evolving into a meaningful revenue stream.

For 2026, the company forecasts revenue between $50.7 and $51.7 billion, with a target operating margin of 31.5% and strong growth in advertising. Management even expects advertising revenue to nearly double during 2026. Everything suggests the engine is running at full speed.

In short, everything went perfectly. And yet…

WHY THE STOCK FELL

Despite the impressive results, Netflix shares dropped almost 5.5% in after hours trading. And no, it was not because someone found something hidden in the financials.

The main reason was the company’s announcement that it is pausing its share buyback program. Not because anything is going wrong, but in order to preserve capital flexibility ahead of the acquisition of Warner Bros. In simple terms, Netflix is not spending cash to repurchase its own shares right now because it wants to keep that cash for something much bigger.

This did not sit well with many investors who expected Netflix to continue returning capital to shareholders. Markets are not always patient, and they certainly do not like pauses in buyback programs.

Additionally, several analysts point out that although the numbers were excellent, margin expansion is being pushed into the second half of 2026. That implies higher execution risk, meaning a greater chance that management may fail to deliver on its targets, especially now that it is dealing with a massive acquisition.

THE WARNER DEAL

As for the deal with Warner Bros, Netflix revised its offer and is now submitting an all cash bid of $27.75 per share for Warner Bros assets. This fully cash proposal replaces the previous offer that included an equity component.

The offer covers the Warner Bros production studios as well as the HBO Max platform. It does not include Discovery Global’s television networks, which are expected to be spun off into a separate company.

At the same time, Paramount Skydance has submitted a competing hostile offer of $30 per share for the entirety of Warner Bros. The full package. This bid puts intense pressure on Netflix, as it raises the bar on how much Warner Bros is perceived to be worth.

To support its own proposal, Netflix increased its borrowing capacity to $42.2 billion through partnerships with major banks such as Wells Fargo, BNP Paribas, and HSBC.

The deal is now headed to a vote among Warner Bros shareholders, expected to take place before April. That will be the moment when the market decides whether it ultimately supports Netflix’s strategy.

The CEOs of the two companies, David Zaslav and Ted Sarandos, have already stated that the merger would accelerate Netflix’s expansion strategy, significantly strengthen its content library, offer more flexible subscription options for users, create new jobs, and increase investment in US based production.

In short, this is a mega deal that, if completed, would reshape the global entertainment landscape.