Netflix Shares Sink 6.5% In Premarket After Earnings—CEO Talks Up Warner Deal

Core Viewpoint - Netflix's shares experienced a significant decline in premarket trading despite the company reporting Q4 earnings that slightly exceeded Wall Street expectations, primarily due to a projected increase in spending on content and the acquisition of Warner Bros. [1] Financial Performance - Netflix reported a revenue increase of 18% year-over-year, reaching $12.05 billion in Q4, which was above Wall Street's projection of $11.97 billion [2] - Earnings per share were 56 cents, narrowly beating the forecast of 55 cents [2] - The global subscriber base grew to 325 million, up from 301 million at the end of 2024 [2] - Advertising revenue surged to $1.5 billion, which is two-and-a-half times higher than in 2024 [2] Future Projections - The company's forecasts for the current quarter fell short of Wall Street estimates, as Netflix plans to increase its spending on TV shows and movies by 10% this year [3] - The anticipated $83 billion acquisition of Warner Bros. is expected to add $275 million to Netflix's spending this year [3] Strategic Insights - CEO Ted Sarandos described the Warner Bros. acquisition as a "strategic accelerant" and emphasized the value of the mature theatrical business that Warner Bros. brings [4] - Sarandos noted that Warner films will be released in theaters with a 45-day window, highlighting the importance of the HBO brand as a prestigious asset [4] Competitive Landscape - Sarandos downplayed concerns that the Warner Bros. acquisition would harm competition, stating that Netflix competes with a wide range of platforms, including broadcast TV, YouTube, and Instagram [5] - He pointed out that the landscape of television has evolved, with major events like the Oscars and NFL being available on various platforms, indicating a shift in competition dynamics [5]