Netflix (NFLX +0.59%) investors have had a rough go of it the past six months. Shares are down more than 38% from their peak at the end of last June as of this writing. That sell-off accelerated at the end of last year as it agreed to acquire Warner Bros. Discovery (WBD +1.68%), and then released earnings with a disappointing 2026 outlook.
But long-term investors may be holding on with expectations for the stock to bounce back this year. Here are three things investors need to know.
Image source: Netflix.
1. 2026 revenue and profit growth likely won't repeat 2025
Last year's revenue and earnings results benefited from a couple of key factors that are unlikely to repeat themselves in 2026.
First, most of 2025 saw favorable exchange rates for the dollar. As a result, international sales in non-U.S. currency effectively brought in more revenue in U.S. dollars for the company than they otherwise would have. Management says that the effect of foreign exchange rates added about $541 million to its revenue. It will lap the spike in foreign exchange rates after the first quarter this year.
Second, Netflix raised prices for U.S. and Canadian customers early last year. It's unlikely to enact another price hike on its biggest market before the end of 2026. That said, in its fourth-quarter letter to shareholders, management suggested that it has plans to raise prices in some markets.
Overall, management's 2026 outlook calls for revenue growth of 12% to 14%, versus the 16% growth it produced last year.
2. The business is steadily growing more profitable
While management is guiding for slower revenue growth, it expects to continue expanding its operating margin. After converting 29.5% of revenue into operating profits in 2025, management expects to reach a 31.5% operating profit margin in 2026.
That number is in line with Netflix's historic ability to produce operating leverage as it scales. It may be the most appealing aspect of investing in Netflix. Management is able to predict its revenue fairly accurately and then plan for its biggest expenses, namely content costs, in order to hit a target operating margin.
3. The Warner Bros. Discovery deal remains a big question mark
Netflix and Warner Bros. Discovery may have agreed to a merger deal, but management doesn't expect it to close until late 2026 or early 2027. Whether the deal will get regulatory approval is a big question mark. If it does, Netflix will have to take on significant amounts of debt to complete the acquisition. That could weigh on earnings results, as interest expense cuts into profits.
Moreover, it's unclear exactly how Netflix plans to integrate Warner Bros. properties. It could curb theatrical releases from the film studio in favor of streaming exclusives. It could reduce sales of television productions to other networks. Both moves could hurt the value of the business in the short run.
On top of that, there's significant overlap between HBO subscribers and Netflix subscribers, so offering a bundle for both streaming services could also hurt profitability in the short term. On the other hand, it could reduce churn, resulting in improvements to long-term subscriber growth for both.
A lot remains to be seen, and investors should keep an eye on developments. It would be a huge transformation of Netflix if it can successfully complete the acquisition.
