Netflix (NFLX) Stock Drops 5% Despite Strong Earnings as Warner Bros Deal Takes Center Stage

TLDR

• Netflix switched to an all-cash offer of $27.75 per share for Warner Bros Discovery, keeping the total deal at $82.7 billion to block Paramount’s competing bid.
• Netflix stock dropped over 5% in after-hours trading despite beating Q4 earnings expectations with revenue of $12.1 billion and 325 million paid subscribers.
• The streaming company reported Q4 earnings of $0.56 per share, slightly above the $0.55 forecast, but investors focused on future concerns rather than current performance.
• Netflix will pause share buybacks and secured bridge loans to fund the Warner Bros acquisition, which comes with $85 billion in combined debt.
• Paramount’s $30 per share cash offer expires January 21, while Netflix scheduled a shareholder vote by April with Warner Bros board backing the all-cash deal.

Netflix shares fell over 5% in after-hours trading Tuesday following its Q4 earnings release. The stock decline came despite the company beating Wall Street expectations on both revenue and earnings.

Netflix, Inc., NFLX

The streaming giant reported Q4 revenue of $12.1 billion, topping analyst estimates of $11.97 billion. Adjusted earnings reached $0.56 per share, beating the forecast of $0.55 per share.

Paid memberships climbed to 325 million globally. This reinforces Netflix’s position as the world’s largest paid streaming platform.

But investors weren’t celebrating. The market’s attention has shifted from quarterly results to what happens next.

Warner Bros Battle Heats Up

Netflix made a major move Tuesday by switching to an all-cash offer for Warner Bros Discovery. The new bid stands at $27.75 per share, maintaining the $82.7 billion total deal value.

This replaces the original offer that mixed $23.25 in cash with $4.50 in Netflix stock. The Warner Bros board unanimously supports the revised all-cash proposal.

The change matters because Netflix shares have tumbled 15% since announcing the merger on December 5. The stock closed at $88 per share Friday, well below the original $97.91 floor price.

Paramount has been circling Warner Bros with its own $30 per share all-cash bid. The David Ellison-led company’s tender offer expires January 21.

Looking Ahead at 2026

Netflix provided revenue guidance of $50.7 billion to $51.7 billion for 2026. The lower end of that range fell slightly below Wall Street expectations.

The company plans to keep spending heavily on content and new projects. This could squeeze margins in the short term.

Advertising revenue more than doubled last year. Netflix expects ad revenue to roughly double again in 2026 to about $3 billion.

The company is expanding live content, including sports and events outside the U.S. New operations centers are being built in international markets to support this push.

Netflix will pause share buybacks to preserve cash for the Warner Bros deal. The company secured bridge loans to help fund the acquisition.

A merger with Netflix would leave the combined company with roughly $85 billion in debt. Netflix’s market valuation stands at $402 billion compared to Paramount’s $12.6 billion.

The Netflix-Warner Bros combination would carry a leverage ratio under four. A Paramount-Warner Bros deal would have a ratio around seven.

Netflix maintains an investment-grade credit rating. Paramount’s bonds are rated at junk levels by S&P.

Warner Bros will hold a special investor meeting by April to vote on the Netflix deal. Co-CEO Ted Sarandos said the all-cash agreement “will enable an expedited timeline to a stockholder vote and provide greater financial certainty.”

Warner Bros rejected Paramount’s bid, calling the $30 per share offer insufficient after factoring in “price and numerous risks, costs and uncertainties.” The board values a planned spin-off of Discovery Global between $1.33 and $6.86 per share depending on valuation method used.

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