Netflix (NFLX 0.99%) performed well for most of 2025, but the company's shares dropped after it released its third-quarter earnings. It then announced a 10-for-1 stock split that helped it regain some of those losses, but recent developments, especially regarding its proposed blockbuster acquisition of Warner Bros. Discovery, have weighed on the company.
The stock took another dive following its most recent quarterly update. It is now down by 27% over the past six months. Is Netflix worth buying on the dip? My view is that it is.
Financial results were strong
For the fourth quarter, Netflix's revenue increased by 17.6% year over year to $12.1 billion. Its earnings per share climbed 30.2% year over year to $0.56, while Netflix's free cash flow rose 35.8% year over year to $1.9 billion. Netflix is still the king of streaming and now boasts over 325 million paid subscribers.
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The company's results were strong overall, and even though it guided for slower top-line growth in the first quarter, the slate of new and returning content it is launching on its platform should give it plenty of momentum throughout the year as it attracts even more paid subscribers.
The acquisition could unlock value
Netflix's proposed acquisition of Warner Bros. won't be cheap. The all-cash transaction would cost a hefty $82.7 billion. It would add significant debt to the company's balance sheet. Some investors and analysts are also worried about some drawbacks from lawmakers and regulators. All of these are important considerations.
However, Netflix's move here could be an important one for the company. With all the success the streaming giant has had, Warner Bros. boasts a deep library of popular characters and movie franchises. If you combine that with Netflix's ability to use data on viewer habits to create popular content -- from movies to TV shows -- the possibilities become attractive.
NASDAQ: NFLX
Key Data Points
Netflix will likely juice Warner Bros. brands for all they are worth, launching sequels and spin-offs endlessly. This could strengthen engagement in its ecosystem while attracting significantly more viewers to the platform. So, even though the acquisition isn't without its risks, the upside is also massive.
There is plenty of growth potential
Even without this move, though, Netflix's future in the streaming niche remains bright. True, it has plenty of competition, which has significantly intensified since the turn of the decade or so. But thanks to its brand name and network effects -- and several changes it made to its business -- it has been able to remain the top player. As management points out, Netflix still commands less than 10% of TV viewing time even in its most advanced markets.
There is plenty of white space left for the company to exploit. And after the beating it took over the past six months, it is a great time to buy the stock.
