Core Viewpoint - Netflix's Q4 performance exceeded Wall Street expectations, with global subscribers surpassing 325 million by year-end, but the company provided cautious guidance for the current quarter and the full year due to profit impacts from the Warner Bros acquisition and a pause in stock buybacks, disappointing investors [1][12][13] Financial Performance - Revenue: Q4 revenue reached $12.05 billion, a year-over-year increase of 17.6%, surpassing analyst expectations of $11.97 billion [4] - Operating Margin: Q4 operating margin was 24.5%, above analyst expectations of 24.2% and the company's own guidance of 23.9% [4] - Net Profit: Q4 net profit was $2.419 billion, a 29.4% year-over-year increase, exceeding the company's guidance of $2.355 billion [4] - EPS: Q4 diluted EPS was $0.56, a 30.2% increase year-over-year, slightly above analyst expectations of $0.55 [4] - Free Cash Flow: Q4 free cash flow was $1.872 billion, a 35.8% increase year-over-year, significantly higher than the expected $1.46 billion [4] Performance Guidance - Revenue: Q1 revenue is projected at $12.16 billion, slightly below analyst expectations of $12.17 billion; full-year revenue is expected to be between $50.7 billion and $51.7 billion, a year-over-year growth of 12% to 14% [6] - EPS: Q1 EPS is expected to be $0.76, lower than the analyst expectation of $0.82 [6] - Operating Profit: Q1 operating profit is projected at $3.906 billion, with an operating margin of 32.1%, below analyst expectations [7] - Free Cash Flow: Full-year free cash flow is expected to be around $11 billion, lower than the expected $11.93 billion [7] Subscriber Growth - Global paid subscribers exceeded 325 million, reflecting an annual growth of nearly 8%, driven by membership growth, price increases, and advertising revenue [9][10] Warner Bros Acquisition - Netflix announced a modification to the Warner Bros acquisition agreement, shifting from a cash-and-stock deal to an all-cash offer of $27.75 per share, maintaining a total transaction value of $72 billion [12] - The acquisition is expected to incur an additional $275 million in related costs, impacting profit margins [10][12] - To support the acquisition, Netflix has paused its stock buyback program, contributing to a decline in stock price [13] Revenue Growth Drivers - Despite slowing growth in new users and viewing hours, Netflix maintained double-digit revenue growth through price increases and advertising initiatives, with advertising revenue expected to double from $1.5 billion in 2025 to approximately $3 billion in 2026 [14] - Strong content offerings, including popular series and live events, contributed to Q4 performance [14] Regional Performance - Revenue in the U.S. and Canada reached $5.34 billion, an 18% year-over-year increase, exceeding analyst expectations [15] - Revenue in Europe, the Middle East, and Africa (EMEA) was $3.87 billion, also an 18% increase, surpassing expectations [15] - Latin America revenue was $1.42 billion, a 15% increase, in line with analyst expectations [15] - Asia-Pacific revenue was $1.42 billion, a 17% increase, slightly below expectations [15]