Netflix (NFLX +0.12%) stock was down as much as 7% in pre-market trading and off roughly 4% on Wednesday to around $83.40 per share -- a 52-week low. The catalyst is the streamer's fourth-quarter earnings report, which many investors found disappointing.
The Q4 results themselves were solid and beat analysts' estimates. Netflix posted revenue of $12.05 billion -- up about 18% year over year. It topped estimates of $11.97 billion. Net income climbed 29% year over year to $2.4 billion, or $0.56 per share. This topped estimates of $0.55 per share.
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This concern was the outlook for 2026, which calls for revenue of $50.7 billion to $51.7 billion, or annual growth of 12% to 14%. That would be below the 16% revenue growth rate in 2025.
There were also some concerns about subscriber growth. While subscribers grew 8% in 2025 to 325 million, the rate was below each of the past two years. With an expected doubling of ad revenue in 2026, many investors likely translated that to lower growth in memberships, given the lukewarm revenue projections.
Warner Bros. deal: The reviews are in
Another factor hanging over investors is the pending deal to buy Warner Bros. assets from Warner Bros. Discovery (NASDAQ: WBD). Netflix recently upped its offer to an all-cash deal for $27.75 per share. The total value, including taking on some Warner Bros. debt, is about $82.7 billion.
Many investors are concerned about this potential acquisition. Since it was first announced in early December, Netflix stock has dropped about 23%. There are worries that Netflix is overpaying for Warner Bros., with the offer driven up by a hostile takeover bid by Paramount Skydance.
In addition, many investors see potential risks with integration -- that is, successfully integrating properties like HBO Max and Warner Bros. film studios and theatrical releases into the Netflix ecosystem. There are also risks of Netflix losing focus on the successful business it's created to focus on integrating this entertainment behemoth.
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Then there is the uncertainty around whether or not it will even get approved by Warner Bros. Discovery shareholders in April, given the Paramount offer. Further, there are regulatory hurdles and potential antitrust challenges.
So, whether you like the deal for Netflix or don't, there are many uncertainties.
Are these warning signs or overblown worries?
Investors have to sort out whether this is just a whole lot of short-term noise around Netflix that you should ignore or if these are long-term warning signs.
I think it's a bit of both. The short-term earnings and outlook-related sell-off is a bit overblown. Yes, the subscriber growth may be slowing, but it's not by a lot, and that is expected for a maturing company. Plus, the revenue is coming from other places, like ad growth.
The valuation was a bigger concern six months ago when it was trading at 63 times earnings, but the sell-off has brought it down to a more reasonable 27 times forward earnings.
My bigger concern is the Warner Bros. deal and how all of that shakes out. It's a lot to take on, and it's hard to have much visibility into what it will look like right now, or if it will even happen. I could see Netflix stock stagnating until we know more about this potentially massive deal.
