Netflix’s proposed $82 billion merger with Warner Bros. Discovery is encountering significant legal and regulatory challenges, casting doubt on the deal’s completion. Despite the streaming giant’s continued operational strength, skepticism is mounting on Wall Street regarding whether antitrust authorities will grant approval.
A Robust Core Business Amidst Uncertainty
Separate from the merger concerns, Netflix’s underlying business performance remains strong. In a shareholder letter dated October 21, management projected earnings per share (EPS) of $5.45 for the ongoing fourth quarter. This forecast highlights the profitability of its advertising-supported tier and its crackdown on password sharing. The company is also expanding into physical experiences, evidenced by the opening of its second “Netflix House” venue in Dallas on December 11.
The “YouTube Defense” Faces Scrutiny
The primary source of recent investor anxiety stems from reports emerging on Friday afternoon. These indicate that regulatory bodies are critically examining Netflix’s justification for the takeover. The streaming leader is defending the acquisition by arguing it needs to compete more effectively against YouTube’s dominance in the digital advertising market. This so-called “YouTube defense” is reportedly meeting with skepticism from regulators.
Should investors sell immediately? Or is it worth buying Netflix?
Announced on December 5, 2025, the transaction terms involve a mix of cash and stock valued at $27.75 per Warner Bros. Discovery share. The strategic goal is to combine Netflix’s streaming infrastructure with Warner’s vast content library, which includes HBO and DC Universe properties. However, the ambitious target for a final closing in the third quarter of 2026 now appears increasingly uncertain.
Market Reaction and Technical Pressure
Investors reacted swiftly to the regulatory concerns, sending Netflix’s stock price below the $96 mark to close at $94.11 as the week ended. This places the shares well below their 52-week high of $134.11 reached in June. The chart picture remains tense, with analysts having identified a “Death Cross” pattern in early December—a technical signal often interpreted as a precursor to further weakness. The market is currently pricing in the risk of a protracted legal battle or forced concessions.
Looking Ahead: A Pivotal Earnings Report
The investment community’s focus now shifts to the quarterly results scheduled for mid-January 2026. Key points will be whether management confirms the $5.45 EPS forecast and provides new details on the status of the regulatory review. Should the merger ultimately be blocked, Netflix could potentially face substantial breakup fees. The coming weeks will be critical in determining whether this mega-deal can clear its formidable regulatory obstacles.
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