""This is an exciting time in the business. Lots of innovation, lots of competition," Sarandos enthused on Tuesday's earnings conference call. Netflix has a history of successful transformation and of pivoting opportunistically, he reminded the audience: Once upon a time, its main business entailed mailing DVDs in red envelopes to customers' homes. Despite Sarandos' confident delivery, however, the pitch didn't land with investors. The company's stock, which was already down 15% since Netflix announced the deal in early December, sank another 4.9% in after-hours trading on Tuesday."
"The company beat EPS expectations by a penny, and said it now has 325 million paid subscribers and a worldwide total audience nearing 1 billion. Its 2026 revenue outlook, of between $50.7 billion and $51.7 billion, was right on target. Still, investors are worried that the Warner Bros. deal will force Netflix to compete outside its lane, causing management to lose focus."
Netflix's co-CEOs proposed acquiring Warner Bros. Discovery for $83 billion to accelerate streaming and expand into TV and theatrical film. Executives framed the move as strategic innovation and transformation. Investors reacted negatively: stock fell further after the earnings call despite solid quarterly results. Netflix beat EPS, reported 325 million paid subscribers and nearly 1 billion global viewers, and issued a 2026 revenue outlook of $50.7–$51.7 billion. Concerns center on potential loss of management focus, competing outside the company's core lane, paused share buybacks to accumulate deal cash, and a rival bid from Paramount Skydance increasing takeover uncertainty.
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