At the close of trading on Jan. 22, shares of Netflix Inc. (NASDAQ: NFLX) stock were down 2.13% extending the stock’s five-day loss to 7.07%. If you look back 30 days, NFLX stock is down over 11%. And this is coming after the company beat on the top and bottom lines when it reported earnings on Jan. 20.
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But those were just the headline numbers. The streaming giant’s revenue was up 18% year-over-year (YoY). The company also reported over 325 million subscribers. Netflix’s latest earnings report reinforces the strength of its core streaming business, but the market’s reaction shows that investors are now laser‑focused on what comes next for NFLX stock as it absorbs the Warner Bros. Discovery deal and digests a premium valuation.
Netflix has been here before. In early 2022, NFLX stock was in a downward slide as it introduced an ad-supported tier and pledged to crack down on password sharing. Introducing ads and not allowing users to share seemed to go against several of the company’s core philosophies.
But in a plot twist some didn’t see coming, Netflix has thrived since that time. And if you weren’t in NFLX stock early in 2022, you likely missed out on one of the great bull runs of any stock, including the Magnificent 7 stocks.
Earnings Beat, But Expectations Were Higher
Netflix posted fourth‑quarter 2025 earnings of 0.56 per share, a narrow beat versus consensus at 0.55, on revenue of about 12.05 billion, roughly 1% ahead of forecasts. Revenue climbed about 18% year over year, driven by membership growth, higher prices, and rising advertising contribution. Operating income grew roughly 30% with margin expanding to about 24.5%, reflecting strong operating leverage even as Netflix ramped spending around live content and the Warner Bros. bid.
Paid memberships crossed the 325 million mark, a key psychological milestone that confirms Netflix’s position as the scale leader in global streaming. However, some analysts had modeled an even higher subscriber figure, which contributed to a lukewarm reaction despite the beat on the headline numbers.
Guidance also underwhelmed: Netflix is calling for first‑quarter 2026 revenue of around 12.16 billion, slightly below prior expectations, and EPS of about 0.76, under the Street’s 0.81 estimate, which helps explain why NFLX stock is trading lower post‑earnings.
Why NFLX Stock is Selling Off
In the days before and after the report, NFLX stock has traded lower even as the company’s fundamentals continue to improve. One driver is guidance; a modest revenue and EPS outlook suggests 2026 will be an investment year, with management asking shareholders for patience as it integrates Warner assets and builds a larger ad‑supported business.
Another is simple expectations: after a strong multi‑year run and a 10‑for‑1 stock split in November 2025, Netflix came into earnings carrying a premium multiple, leaving little room for any perceived shortfall.
The Warner Bros. Discovery transaction is also adding a new layer of uncertainty to NFLX stock. Investors worry that a large, complex acquisition could distract management and pressure free cash flow as Netflix pauses buybacks and raises financing to fund the roughly 72–83 billion all‑cash deal. Those concerns are overshadowing the positive data points in the quarter and are a big reason why analyst reaction has been mixed, with several firms trimming price targets even as they maintain generally constructive long‑term views.
The Warner Bros. Deal: Risk and Opportunity
Strategically, the Warner Bros. Discovery acquisition is a swing for the fences that could reshape Netflix’s competitive position. The transaction would add Warner’s deep film and TV library, including major franchises, plus the HBO Max streaming platform and studio capabilities, giving Netflix more premium IP and a stronger presence in theatrical releases. Management argues that combining Netflix’s global distribution and data‑driven programming with Warner’s content engine will accelerate growth and make the combined company harder to disrupt.
But the path to that outcome is far from certain, which is where the risk for NFLX stock lies. The deal still faces regulatory review and potential political scrutiny, and competing proposals from Paramount Skydance have highlighted how contentious the process could become.
Netflix has already lined up a large bridge loan and has indicated it will suspend share repurchases to preserve balance sheet flexibility. These moves may pressure near‑term returns even if they make strategic sense.
Growth Drivers Beyond the Headline Deal
While the Warner narrative dominates the conversation around NFLX stock right now, the core business still has multiple levers for growth. Advertising is a key pillar: Netflix expects ad revenue to roughly double in 2026 as it rolls out more ad‑tier countries, improves targeting, and deepens partnerships with brands. Price optimization and the ongoing crackdown on password sharing continue to support average revenue per membership, giving Netflix more room to invest in content and product innovation.
Content remains the company’s main competitive weapon. Recent quarters have shown the power of big tentpoles like “Stranger Things” and other global franchises to drive engagement and new sign‑ups, and management plans to lean harder into event programming and live experiences as differentiators.
Longer term, Netflix is targeting low‑to‑mid teens annual revenue growth and attractive free cash flow margins, suggesting that if execution stays on track, the current pullback in NFLX stock could eventually look like a consolidation within a longer uptrend.
What This Means for NFLX Stock
For investors, Netflix’s latest report reinforces a familiar pattern: solid execution in the underlying business paired with bouts of volatility whenever the company raises the stakes. The numbers support the bullish case: double‑digit revenue growth, expanding margins, a 325‑million‑strong subscriber base, and a growing ads business that should compound over time. The bear case centers on valuation, execution risk around Warner, and the possibility that integration hiccups or regulatory delays weigh on earnings longer than bulls anticipate.
That tension explains the split analyst reaction around NFLX stock, with some firms lifting price targets on confidence in Netflix’s long‑term growth algorithm while others cut targets to reflect higher risk and a more expensive 2026. For investors willing to look past near‑term turbulence, the current weakness may offer an opportunity to build or add to positions in a company that still sits at the center of global streaming and is now attempting to broaden its moat with a transformational acquisition.
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