Netflix’ (NFLX) stock surge has come to a shuddering halt in recent months. Investors are rightly wondering if the party is over. The streaming giant’s stock flopped overnight posting what many read as ‘soft’ financial guidance. But while soft guidance drags on stock, the Warner Bros Discovery’s (WBD) deal could be a catalyst for changing investor sentiment.
The stock is set to post a near-7% slump when Wall Street reopens later today. At $81.40, it would mark a 39% slump since June.
Reported numbers and guidance
Netflix announced Q4 2025 diluted EPS of $0.56 on $12.05 billion revenue, just beating analyst estimates of $0.55 on $11.97 billion. That was the lowest 2025 quarter for EPS all year. However, it was the highest for revenue.
The company said it ended the year with 325 million global paid subscribers. Advertising revenue was up more than 2.5-times from 2024 to over $1.5 billion.
In Q1 2026, Netflix expects $0.76 EPS on revenue of $12.16 billion. This compares to analysts’ estimates of $0.81 and $12.19 billion, respectively.
For full-year 2026, the company guided for revenue between $50.7 billion and $51.7 billion. This is versus forecasts of $51.03 billion. That annual revenue projection represents growth of 12%-14% year-on-year, or 11%-13% FX neutral growth. This is slower than the 16% pace seen in 2025. Indeed, this soft guidance drags on stock. However, the WBD deal could be a catalyst that encourages renewed optimism.
Warner Bros deal
The numbers came shortly after Netflix improved its $72 billion offer for WBD studios and HBO Max streaming division. The aim was to bolster its stance in a bidding war with Paramount Skydance.
As flagged by Sharesify a week ago, Netflix has sweetened its $82.7 billion (£61.5 billion) offer for the studios and streaming businesses of WBD by making it an all-cash deal. This streamlines its potential completion in the face of a hostile bid from Paramount Skydance.
The streaming company had originally secured the unanimous backing of the WBD board last month with a cash-and-shares proposal that valued the business at $27.75 a share.
The two companies said the switch to an all-cash offer at the same valuation as the original deal ‘simplifies the transaction structure, provides greater certainty of value for WBD stockholders, and accelerates the path to a WBD stockholder vote.’
Soft guidance isn’t great but Netflix, and its shareholders, have been here before and come out of it well. The clear elephant in the room is the WBD deal. Importantly, the WBD deal could be a catalyst if the acquisition is completed. It would add an extensive and valuable content library, including hit movie franchises DC (Batman), Harry Potter, and Lord of the Rings.
It would also bring streaming platforms Max (formerly HBO Max) and Discovery+, and TV channels in sports and entertainment into the Netflix family.
But getting drawn into a long-run bid battle remains a worry, a view shared by analysts at Jefferies. In summary, soft guidance drags on stock. However, the WBD deal could be a catalyst for a positive re-rating if executed successfully. ‘Increased deal certainty’ would be a ‘positive catalyst’ for the stock, Jefferies said.
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