Netflix (NFLX) shares have tumbled approximately 28-30% from their summer 2025 highs, trading near $88.50 as the company approaches its fourth-quarter 2025 earnings report on January 20, 2026. The steep decline follows a disappointing Q3 2025 report where the streaming giant's operating margin of 28.2% missed the Wall Street estimate of 31.5%, partly due to a $619 million charge from a Brazilian tax settlement.
Analysts expect Q4 revenue of $11.97 billion, a 16.7% year-over-year increase, and earnings per share (EPS) of $0.55, representing a 28% jump. However, investor focus has shifted from subscriber growth to profitability metrics and advertising revenue. Netflix has guided for a Q4 operating margin of 23.9%, with full-year 2025 guidance targeting 29.3% on revenue of $45.1 billion.
A major overhang on the stock is the uncertain bidding war for Warner Bros. Discovery (WBD) assets. Netflix has reportedly made an $82.7 billion proposal (approximately $27.75 per share), which may shift to an all-cash structure. This effort faces a significant challenge from a hostile, all-cash bid by Paramount Skydance valued at $108.7 billion ($30 per share). A Delaware court decision on January 15 declined to fast-track litigation blocking a Netflix-WBD deal, providing temporary legal relief but leaving the acquisition's fate unresolved.
Wall Street maintains a Moderate Buy consensus rating with an average price target of $127.23, implying roughly 44.5% upside from current levels. Analysts are split: optimists like Wedbush's Alicia Reese highlight the global advertising potential as a key growth driver, while skeptics, including Monness Crespi Hardt's Brian White, view the potential acquisition as a "dark cloud" creating balance-sheet risk and execution complexity. The upcoming 2026 guidance, particularly regarding advertising revenue—projected to double in 2026 from an estimated Q4 2025 figure near $1.08 billion—will be crucial for sentiment reset.
