Netflix (NFLX +3.17%) beat expectations when it released its fourth-quarter 2025 earnings on Tuesday, Jan. 20. Yet, shares continued to fall. The streaming platform is down 10% since the start of the year as of Jan. 21.
So if Netflix is beating earnings but the share price is falling, does this mean a buying opportunity for investors? Let's have a closer look at what's really happening.
NASDAQ: NFLX
Key Data Points
A hostile and expensive fight for Warner Bros.
Netflix announced on Dec. 5, 2025, its intentions to purchase Warner Bros. Discovery (WBD +0.85%) in a deal worth $82.7 billion. While this would further fortify Netflix's position as the top platform for streaming television and films, investors were immediately nervous. The lengthy process of acquiring a competitor like Warner Bros., combined with the enormous financial strain involved, had investors wondering if this was going to turn into nothing more than an expensive strategic headache.
Image source: Getty Images.
Then just this week, Netflix revised its offer for Warner Bros. to an all-cash offer. So, while the company did beat earnings expectations, analysts and investors alike are still quite spooked about the bidding war that's heating up for Warner Bros. Netflix's rival, Paramount Skydance Corporation (PSKY 0.64%) are attempting a hostile takeover of Warner Bros., which is only inflaming the situation for Netflix investors.
NASDAQ: PSKY
Key Data Points
Netflix's strong quarter held back by acquisition risk
Looking at the bullish case, Netflix is the champion among the mega-streamers. It now boasts more than 325 million subscribers worldwide. While it's likely near market saturation in the U.S., there's ample opportunity for Netflix to continue expanding internationally.
In its latest earnings, Netflix's revenue grew to $12 billion in Q4 2025, an 18% year-over-year increase. Net income is also up 29% from the year prior, and the company has an operating margin of 31%. Ad revenue doubled in 2025 to $1.5 billion, and the company expects it to double again in 2026. This really stands out as one of Netflix's strongest growth engines.
Netflix's revenue guidance for 2026 shows continued growth but at a slightly slower pace than Wall Street expectations. Again, despite showing strong fundamentals and growth, shares continue to slide. This means concerns about the Warner Bros. deal are really spooking investors.
This acquisition marks a strategic pivot away from building in-house to buying an already established entity. Buying Warner Bros. would expand Netflix's content library, which has a significant number of popular television franchises.
Still, investors are nervous about the cost and execution risk at the moment. Any antitrust scrutiny could also pose a significant challenge. The deal is just plain risky in that it poses a real threat to an otherwise excellent balance sheet.
NASDAQ: WBD
Key Data Points
Is it a buy right now?
Investors should buy Netflix while it's near its 52-week low only if they are bullish on the Warner Bros. deal. It could bring millions more subscribers and long-term growth if executed well. However, right now I think the risk is too high to justify. Paramount's hostile bid isn't going away, and there seems to be more at risk than to be gained from the deal.
