Netflix Shares Under Pressure Following Strategic Acquisition Shift

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Despite reporting robust quarterly performance and reaching a new milestone in subscriber numbers, Netflix's stock faced significant downward pressure in Thursday's pre-market trading. The streaming giant's shares fell approximately 5%, hovering near a 52-week low. This reaction was primarily triggered by a cautious financial outlook for 2026 and the company's decision to suspend its share repurchase program to fund a major strategic acquisition entirely in cash.

Netflix released its fourth-quarter 2025 results after the U.S. market close on Wednesday. Operational metrics surpassed analyst expectations, though forward guidance tempered market enthusiasm.

Key Q4 2025 Figures:
* Earnings Per Share: $0.56, a 30% year-over-year increase (Consensus: $0.55)
* Revenue: $12.05 billion, up 17.6% from the prior year (Consensus: $11.97 billion)
* Global Paid Subscriptions: Exceeded 325 million
* Operating Margin: 24.5%, compared to 22.2% a year earlier

The central focus for investors, however, was the updated structure of the Warner Bros. Discovery (WBD) acquisition. On January 20, Netflix revised the agreement to an all-cash offer of $27.75 per WBD share, valuing the transaction at an enterprise value of approximately $83 billion. To finance this substantial outlay, management has paused its stock buyback initiative, removing a key support mechanism for the share price in the near term.

The company's guidance also fell short of market projections:
* Q1 2026 EPS Forecast: $0.76 (Consensus: $0.81)
* Full-Year 2026 Revenue Growth Forecast: 11-13% on a currency-neutral basis, following 17% growth in 2025.

The confluence of acquisition-related costs, a moderated growth trajectory, and the halted buybacks explains the pronounced selling pressure.

Analyst Reactions and Market Sentiment

The market's negative response was swift. After closing at $87.26 on Wednesday, the stock dropped over $4 in after-hours trading, approaching its 52-week low of $82.11.

Several prominent analyst firms have adjusted their ratings and price targets to account for the anticipated increased debt load and softer organic growth profile:

• Goldman Sachs maintained a "Neutral" rating but lowered its price target from $130 to $112.
• CFRA downgraded the stock from "Buy" to "Hold," slashing its target from $130 to $100, citing risks associated with the high leverage needed to fund the WBD deal.
• Jefferies maintained a "Buy" recommendation with a $134 price target, emphasizing the long-term strategic potential of the combined entity.

While shifting to an all-cash deal avoids dilution for existing shareholders, it significantly increases the company's leverage. The transaction is expected to close within 12 to 18 months, pending regulatory approvals and a WBD shareholder vote targeted for April 2026.

Evolving Growth Drivers and Integration Challenges

The stock's decline also reflects a market reassessment of Netflix's growth phase. The company added 23 million net new subscribers in 2025, a deceleration from the 41 million added in 2024.

Concurrently, Netflix is aggressively advancing monetization through newer revenue streams:
* 2025 Advertising Revenue: Approximately $1.5 billion, roughly 2.5 times the 2024 figure.
* 2026 Goal: To double advertising revenue once again.

The ad-supported subscription tier is thus becoming a central growth pillar. Although average revenue per user for this tier remains below that of standard plans, management sees substantial further potential.

The planned Warner Bros. Discovery acquisition aims to dramatically expand Netflix's content library—including HBO and Warner Bros. Studios—bolstering its competitive position against large tech and media rivals like YouTube and Disney. However, analysts such as Geetha Ranganathan of Bloomberg Intelligence warn of a "hard, long road" ahead for integration, contributing to market skepticism.

Technical Levels and Forward Expectations

In the coming months, investor attention will center on two key areas: the regulatory and legal execution of the WBD acquisition, and the specific details of announced price increases for 2026. Netflix has not yet provided specifics on the regions or timing for these higher subscription fees.

From a technical analysis perspective, the stock is testing crucial support levels. A sustained break below the 52-week low of $82.11 could trigger further technical selling. With share repurchases on hold, the company's operational execution will face even greater scrutiny.

For the full year 2026, Netflix provided a revenue outlook ranging between $50.7 and $51.7 billion. This projection is based on the anticipated doubling of advertising revenue, continued—though slower—subscriber growth, and initial, limited contributions from the integration of Warner Bros. Discovery.