Netflix Pauses Buybacks for $82.7B Warner Bros Deal, Guides 12–14% Growth
Netflix reported Q4 revenue of $12.05B (+17.6% Y/Y) and EPS of $0.56, with operating margin expanding to 24.5% and paid memberships hitting 325M. It forecast 12–14% revenue growth for 2026 (11–13% CC), paused its share buyback to fund the $82.7B all-cash Warner Bros deal, and shares slid ~5%.
1. European Trading Reaction
In early trade on Wednesday, Netflix shares listed in Frankfurt fell by 7% despite the company reporting a fourth-quarter performance that exceeded revenue and earnings expectations. The weakness in Europe reflects investor anxiety over broader market headwinds—geopolitical tensions in Eastern Europe, slowing global growth indicators, and recent tariff threats on key markets—that have cast a pall over the start of the Q4 earnings season for major technology names.
2. Q4 Performance Highlights
Netflix reported fourth-quarter revenue of $12.05 billion, up 17.6% year-over-year and accelerating from 17.2% growth in the prior quarter. Operating margin expanded to 24.5%, compared with 22.2% in the year-ago period, driving a 30% jump in earnings per share to $0.56. Free cash flow reached approximately $1.9 billion, up from $1.4 billion a year earlier, while paid global memberships topped 325 million. The company’s advertising arm delivered 2.5× revenue growth versus 2024, generating $1.5 billion—over 3% of total 2025 revenue.
3. 2026 Guidance and Investor Concerns
Management forecast full-year 2026 revenue growth of 12% to 14%, below the 14%–17% constant-currency expansion guided for 2025 at the same point last year. The implied deceleration to roughly 13% growth at the top end has rattled investors, given a current valuation in the mid-30s price-to-earnings range. The company also projected a modest 15.3% increase in first-quarter revenue, signaling potential further slowing later in the year and prompting calls for better visibility on long-term growth drivers.
4. Warner Bros. Discovery Acquisition Impact
Netflix has secured bridge financing for its $72 billion all-cash offer to acquire Warner Bros. Discovery, which would elevate leverage to approximately 5× EBITDA. Management emphasized expected cost synergies through in-house production efficiencies and tighter integration of Warner’s studio assets. The deal has prompted a temporary pause in share buybacks as the company builds cash reserves, while executives argue that expanded access to theatrical distribution and established franchises will bolster content output and long-term profitability.