Netflix Inc. reached a historic milestone, surpassing 325 million global streaming subscribers, yet its stock faced significant downward pressure following its latest earnings report. The market’s reaction highlights investor concerns that extend beyond strong quarterly fundamentals.
A Shift in Acquisition Strategy Weighs on Sentiment
The streaming leader released quarterly figures on January 20 that slightly exceeded analyst forecasts. Operational performance was solid, with revenue reaching $12.05 billion and earnings per share coming in at 56 cents. The advertising segment showed particularly dynamic growth, increasing two-and-a-half-fold year-over-year to over $1.5 billion.
However, investor attention was swiftly captured by a major revision to the company’s planned acquisition of Warner Bros. Discovery. The deal structure has been altered to a pure cash transaction. Netflix now proposes to pay $27.75 per share, valuing the equity of Warner Bros. at approximately $72 billion. To finance this substantial sum, management has temporarily suspended share buybacks and will instead utilize credit facilities and internal cash flow. While this move provides clarity for Warner Bros. shareholders, it significantly increases the financial burden on Netflix.
Growth Trajectory Shows Signs of Moderation
Market response was negative, with the stock declining more than 4% in after-hours trading, continuing a downtrend observed in recent months. Since initial acquisition rumors surfaced in October 2025, the share price has shed roughly 30% of its value. By the start of 2026, shares were already down 9%.
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This skepticism is largely driven by the company’s outlook for the current fiscal year. Management’s guidance projects revenue growth for 2026 in a range of 12% to 14%. When compared to the 16% increase achieved in 2025, this points to a deceleration in momentum. Market experts interpret this forecast as confirmation that the aggressive growth rates of the past are becoming more challenging to sustain.
Content and Sports: A Strategic Counterplay
In a bid to counteract this trend, Netflix is committing substantial resources to new content. Expenditures in this area are expected to rise by about 10% to nearly $20 billion. A key focus will be on live events and sports broadcasting, including Major League Baseball games and exclusive rights to the World Baseball Classic in Japan. The company has also expanded its partnership agreements with Universal and Sony Pictures.
Leadership now faces the dual challenge of managing the costly integration of Warner Bros. while simultaneously working to stabilize organic growth. The next critical hurdle for the mega-deal is the anticipated shareholder vote in April 2026. Until then, debates surrounding the financing load and the long-term growth strategy are likely to continue dictating the direction of the stock.
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