TLDR
- Netflix converted its Warner Bros Discovery offer to all-cash at $27.75 per share while maintaining the $82.7 billion total deal value.
- Stock fell over 5% after hours despite Q4 earnings of $0.56 per share and $12.1 billion in revenue, both surpassing analyst predictions.
- The streaming platform added subscribers to reach 325 million paid members worldwide, solidifying its market leadership position.
- Bridge loans were secured and share buybacks suspended to finance the Warner Bros purchase, creating $85 billion in total debt.
- Revenue guidance for 2026 between $50.7-$51.7 billion fell below expectations on the low end, raising margin concerns.
Netflix stock fell more than 5% in after-hours trading Tuesday following its Q4 earnings release. The decline happened even though the company exceeded Wall Street expectations across key metrics.
The streaming giant reported Q4 revenue of $12.1 billion compared to analyst estimates of $11.97 billion. Adjusted earnings landed at $0.56 per share versus the $0.55 forecast.
Paid memberships climbed to 325 million globally. This figure cements Netflix’s status as the world’s largest paid streaming platform.
Investors looked past these wins. Their attention shifted to upcoming challenges and strategic moves.
Warner Bros Bid Gets Complete Overhaul
Netflix announced a revised all-cash proposal for Warner Bros Discovery on Tuesday. The new offer stands at $27.75 per share while keeping the total at $82.7 billion.
This replaces the previous combination of $23.25 cash and $4.50 in Netflix stock. The change addresses a real problem for the deal.
Netflix shares have dropped 15% since the merger announcement on December 5. The stock closed Friday at $88, significantly below the original $97.91 floor price.
Paramount remains a threat with its $30 per share all-cash bid. That competing offer expires today, January 21.
Warner Bros’ board unanimously backs Netflix’s revised proposal. A shareholder vote should take place by April according to the company.
Alex Fitch from Harris Oakmark, which holds roughly 96 million Warner Bros shares, said the move increases pressure. “Netflix is serious about winning, and the accelerated shareholder vote means Paramount needs to act with urgency.”
Spending Plans Create Uncertainty
Netflix provided 2026 revenue guidance ranging from $50.7 billion to $51.7 billion. The lower bound disappointed some analysts who wanted higher projections.
Continued heavy investment in content and expansion is planned. This strategy could pressure profit margins over the next few quarters.
Advertising revenue doubled in the past year. Netflix expects another doubling in 2026 to around $3 billion total.
The company is pushing into live content including sports and events outside the United States. New international operations centers are being built to support this expansion.
Share buybacks have been paused to conserve cash. Netflix arranged bridge loans to help cover the Warner Bros acquisition costs.
Deal Comparison Favors Netflix
A Netflix-Warner Bros combination would carry approximately $85 billion in debt. Paramount’s alternative would create $87 billion in combined debt.
Market capitalizations tell a striking story. Netflix is valued at $402 billion while Paramount sits at only $12.6 billion.
The leverage ratio for Netflix-Warner Bros would run under four times. A Paramount-Warner Bros deal would hit roughly seven times.
Credit quality differs substantially between bidders. Netflix holds investment-grade ratings while S&P rates Paramount’s bonds as junk.
Warner Bros rejected Paramount’s $30 offer after evaluating “price and numerous risks, costs and uncertainties.” The board calculated the Discovery Global spinoff value between $1.33 and $6.86 per share based on different methodologies.
Co-CEO Ted Sarandos stated the all-cash agreement “will enable an expedited timeline to a stockholder vote and provide greater financial certainty” for Warner Bros investors.
The Warner Bros board maintains Netflix’s deal is superior despite Paramount’s higher per-share price. Shareholders would retain stakes in the separately traded Discovery Global entity under Netflix’s proposal.
