Netflix reported robust financial results for the fourth quarter of 2025, but its stock fell approximately 5% in after-hours trading as investor focus shifted from strong fundamentals to concerns over its strategic acquisition of Warner Bros. Discovery.
The streaming giant posted Q4 2025 revenue of $12.05 billion, marking an 18% year-over-year increase and slightly exceeding Wall Street expectations. Earnings per share came in at $0.56, beating consensus estimates, while net income rose nearly 30%. The company also achieved a significant milestone, surpassing 325 million global paid subscribers, driven by hit content like Stranger Things Season 6 and The Crown Season 7.
Netflix's advertising business showed remarkable growth, exceeding $1.5 billion for the full year 2025—more than double the prior year. Ad-supported tiers now account for nearly 12% of total subscribers in North America and Europe, with management projecting ad revenue could nearly double again in 2026.
However, investor sentiment turned negative due to uncertainties surrounding Netflix's revised, all-cash acquisition proposal for Warner Bros. Discovery. The offer of $27.75 per share has raised concerns about regulatory hurdles, financing implications, and its impact on Netflix's balance sheet. The company will pause its share repurchase program to preserve cash for the deal and expects roughly $275 million in transaction-related expenses during 2026.
Furthermore, Netflix's forward guidance contributed to the sell-off. The company provided Q1 2026 EPS guidance of $0.76, below analyst expectations of $0.80–$0.82, and set a full-year operating margin target of 31.5%, trailing the 32.6% consensus. The revenue outlook of $50.7–$51.7 billion implies 12%–14% growth, signaling a potential slowdown in margin expansion as Netflix prioritizes strategic scale over near-term earnings optimization.
