Investors have expressed dissatisfaction with Netflix’s 2026 projections and seem unimpressed by the company’s attempt to purchase Warner Bros. Discovery’s studio and streaming divisions.
Although Netflix posted strong year-end and fourth-quarter performance by most accounts, investors have conflicting opinions.
Since the business reported its earnings late on Tuesday, Netflix (NFLX) shares have suffered a steep decline. Investors are still skeptical about Netflix’s $82.7 billion offer to buy Warner Bros. Discovery’s (WBD) studio and streaming divisions, and they also see weakness in the company’s 2026 forecast.
Following a selloff that started in premarket trading and extended in after-hours trading Tuesday after the company’s earnings were released, Netflix shares dropped 2.2% on Wednesday.
The streaming behemoth’s stock has dropped 38% from reaching an all-time high in June of last year and is currently close to a 52-week low. Since Netflix started pursuing Warner Bros. Discovery, a large portion of that reduction has occurred.
In a letter to clients, media analyst Robert Fishman of MoffettNathanson Research stated, “We are left to acknowledge Netflix’s stock price should have a harder time rebounding as long as the ongoing WBD potential bidding war continues.”
Fishman lowered his price target to $115 per share from $140, saying, “After the recent pullback, we think [Netflix’s] stock price reflects an attractive entry point for investors willing to focus on the growth in the core businesses as well as trust that the company will remain disciplined in its pursuit of Warner Bros.”
In order to determine whether Netflix’s bid for Warner Bros. Discovery was motivated by necessity rather than strength, analysts have been watching for any indications of slowing growth in Netflix’s metrics.
However, if you ignore the commotion surrounding the Warner Bros. deal, Netflix seems to be doing fine on the essentials.
In the fourth quarter, the streaming behemoth recorded net income of $2.42 billion, up from $1.87 billion in the same period last year. According to FactSet, analysts projected a net income of $2.39 billion.
Analysts had predicted an average of 55 cents, but earnings per share came in at 56 cents.
Additionally, revenue increased from $10.2 billion in the fourth quarter of 2024 to $12.05 billion, which was somewhat higher than the $11.97 billion forecast by experts.
The company projects an operating margin of 31.5% and revenue growth of 12% to 14% in 2026. Additionally, Netflix stated that it anticipates doubling its ad income this year, which was $1.5 billion in 2025.
However, those numbers—especially the operating-margin guidance—were marginally lower than anticipated because of increased projected expenditures for content creation and the price of purchasing the rights to sporting and other live events. In order to strengthen its cash reserves for the Warner Bros. Discovery merger, the business also announced that it was delaying further share repurchases.
Netflix announced on Tuesday that it had changed its offer for Warner Bros. Discovery from a combination of cash and equity to an all-cash deal.
Some onlookers were further alarmed by that.
In a letter to investors, William Blair media analyst Ralph Schackart stated, “Even though the overall fundamentals of the business remain solid, that will likely take a back seat to the battle to acquire Warner Bros.” But we think the stock is positioned to do better on the outcome of the possible acquisition by Warner Bros. Netflix is still in a strong position to dominate the secular streaming market.
