Why Is Netflix Stock Down Today? Q4 Earnings Beat Isn’t Enough

Core Viewpoint - Netflix's fourth-quarter results exceeded Wall Street expectations, but concerns over slowing subscriber growth and uncertainties regarding its acquisition of Warner Bros. Discovery have led to a decline in stock price [1][2]. Financial Performance - Netflix reported revenues of $12.05 billion, a 17.6% increase year-over-year, and earnings per share of $0.56, both surpassing analyst forecasts [2][3]. - Operating income rose 30% to $2.96 billion, with operating margin expanding from 22.2% to 24.5% [3]. - Net income increased by 29% to $2.42 billion [3]. Subscriber Growth - The company now has over 325 million paid memberships globally, with members watching 96 billion hours in the second half of 2025, a 2% increase year-over-year [4]. - However, Netflix added approximately 23 million subscribers in 2025, a significant slowdown from the 41 million added in 2024, raising concerns about growth peaking since the introduction of its advertising-supported tier in 2022 [5]. 2026 Guidance - Netflix's revenue guidance for 2026 is projected at $50.7-$51.7 billion, indicating a growth rate of 12-14%, down from 16% in 2025 [6]. - First-quarter profit forecasts are below analyst expectations, suggesting a challenging start to the year [6]. Acquisition of Warner Bros. Discovery - Netflix's amended all-cash offer for Warner Bros. Discovery values the acquisition at $27.75 per share, amid a competing bid from Paramount Skydance at $30 per share [7]. - The company plans to suspend stock buybacks while pursuing the deal and anticipates $275 million in acquisition-related expenses in 2026 [8]. - The uncertainty surrounding the acquisition has contributed to a 20% decline in stock price since the announcement [8]. Market Sentiment - Analysts attribute the post-earnings stock weakness to high valuation, management's guidance for margin expansion, and uncertainties related to the Warner Bros. acquisition [9]. - The deal's completion timeline of six to nine months adds to investor uncertainty, despite solid quarterly results [10].