Netflix shares were down around 5% on Wednesday after the company’s fourth-quarter update, making the streaming giant one of the worst performers in the S&P 500.
Revenue rose 18% year over year in Q4, supported by membership gains, higher pricing and stronger advertising.
Netflix reported earnings of 56 cents per share on revenue of $12.05 billion, modestly above the $11.97 billion consensus.
Sentiments were also weak as lingering uncertainty around its proposed acquisition of Warner Bros. Discovery’s studios and streaming assets remains a source of uncertainty.
At least 10 analysts cut their price targets following the results, reflecting worries that profit pressures and deal-related risks could continue to cap near-term upside.
Margins disappoint despite subscriber growth
Netflix reported that it ended 2025 with more than 325 million global paid subscribers, up from 302 million at the end of 2024, underscoring continued strength in customer growth.
However, that progress was overshadowed by the company’s outlook for profitability.
The company said it expects an operating margin of 31.5% for the current year, below the 32.6% consensus estimate.
Netflix also guided to higher content spending, saying it plans to increase investment in programming by 10% in 2026, a move expected to weigh on margins.
The guidance included a $275 million hit related to the pending acquisition of Warner Bros.’ film and television studios and HBO Max, a deal that has become a central source of investor unease.
Warner deal dominates investor sentiment
Netflix’s proposed $83 billion all-cash acquisition of Warner’s studios and streaming assets continues to loom over the stock.
The company amended its offer on Tuesday in an effort to accelerate the transaction and fend off a rival bid from Paramount Skydance.
The revised offer still values Warner’s streaming and studios assets at $27.75 a share, with Warner’s cable business to be spun out to existing investors.
Paramount’s competing all-cash tender offer of $30 a share for all of Warner Discovery is set to expire at 5 p.m. Eastern time on Wednesday, unless extended.
Investors fear that if Paramount raises its bid, Netflix could be drawn into a bidding war, increasing the likelihood that it overpays for the assets. That concern has become a key overhang for the stock.
Guggenheim analyst Michael Morris said the Warner transaction will continue to dictate how Netflix trades.
Concerns about the deal “will remain a primary sentiment driver and likely share appreciation limiter over the next three months,” Morris wrote in a research note.
He cut his price target to $130 from $145, while maintaining a Buy rating.
Analysts divided on Netflix stock
Some analysts argued that the market reaction may be overdone, even as they acknowledged near-term uncertainty.
Seaport Research Partners analyst David Joyce said the margin concerns were “overblown,” but added that the stock is likely to remain in a “deal-related holding pattern for a while.”
Joyce reiterated his Buy rating with a $115 price target.
Brian Pitz of BMO Capital Markets also took a balanced view.
In a note, he said Netflix delivered solid fourth-quarter results, though its initial 2026 guidance was mixed, particularly on margins.
Pitz cut his price target to $135 from $143 but maintained an Outperform rating, highlighting a bright spot in advertising.
“Importantly, Netflix expects its advertising business to roughly double in 2026 to $3 billion as ad revenue scales to 6% of Netflix’s 2026 revenue,” he wrote.
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