Netflix delivers solid 4th quarter, but stock sinks amid worries about slowing subscriber growth

Core Insights - Netflix demonstrated solid financial performance in the last year despite a slowdown in subscriber growth, highlighting the significance of its $72 billion bid for Warner Bros.' movie studio and HBO Max integration into its streaming lineup [1] Financial Performance - In the fourth quarter, Netflix surpassed stock market analysts' projections, ending the year with over 325 million global subscribers, adding approximately 23 million subscribers since 2024 [2] - The 2025 subscriber increase of 23 million represents a significant slowdown compared to the 41 million added in 2024, raising concerns among investors about potential peak growth since the introduction of a low-priced, ad-supported service in 2022 [3] - The company reported a profit of $2.4 billion, or 56 cents per share, marking a 29% increase from the previous year, while revenue rose 18% to over $12 billion [5] Future Projections - Management forecasted a profit for the January-March period that fell below analysts' expectations and announced a halt to stock buybacks while pursuing the Warner Bros. deal [4] - Despite expectations of doubling ad sales, Netflix projected revenue growth to decline from 16% in 2025 to 12% to 14% in the current year, indicating a challenging start to the year [4] Strategic Moves - Netflix shifted its original bid for Warner Bros. from a stock component to an all-cash deal to simplify the process and make it more appealing to Warner Bros. Discovery shareholders amid competition from Paramount [6] - Co-CEO Ted Sarandos emphasized Netflix's experience with competition during a conference call, referencing past rivalries with Walmart and Blockbuster, indicating the company's readiness to adapt to changes in the industry [7]