In terms of creating irresistible storylines, Netflix, the house of Stranger Issues and The Crown, is second to none. And because the streaming video big delivered its quarterly earnings report on Tuesday, executives have been in high storytelling kind, pitching what they promise can be a smash hit: the acquisition of Warner Brothers Discovery.
The corporate’s co-CEOs, Ted Sarandos and Greg Peters, mentioned the deal, which values Warner Brothers Discovery at $83 billion, will speed up its personal core streaming enterprise whereas serving to it broaden into TV and the theatrical movie enterprise.
“That is an thrilling time within the enterprise. A lot of innovation, plenty of competitors,” Sarandos enthused on Tuesday’s earnings convention name. Netflix has a historical past of profitable transformation and of pivoting opportunistically, he reminded the viewers: As soon as upon a time, its most important enterprise entailed mailing DVDs in purple envelopes to prospects’ houses.
Regardless of Sarandos’ assured supply, nevertheless, the pitch didn’t land with buyers. The corporate’s inventory, which was already down 15% since Netflix introduced the deal in early December, sank one other 4.9% in after-hours buying and selling on Tuesday.
Netflix’s monetary outcomes for the ultimate quarter of 2025 have been high quality. The corporate beat EPS expectations by a penny, and mentioned it now has 325 million paid subscribers and a worldwide whole viewers nearing 1 billion. Its 2026 income outlook, of between $50.7 billion and $51.7 billion, was proper on course.
Nonetheless, buyers are apprehensive that the Warner Bros. deal will pressure Netflix to compete outdoors its lane, inflicting administration to lose focus. The truth that Netflix will quickly halt its share buybacks with a view to accumulate money to assist finance the deal, because it disclosed in the direction of the underside of Tuesday’s shareholder letter, most likely didn’t assist issues.
And provided that there’s a rival supply for Warner Bros from Paramount Skydance, it’s not unreasonable for buyers to fret that Netflix could also be pressured into an costly bidding conflict. (Although Warner Brothers Discovery has accepted the Netflix supply over Paramount’s, nobody believes the story is over—not even Netflix, which up to date its $27.75 per share supply to all-cash, as an alternative of inventory and money, hours earlier on Tuesday with a view to present WBD shareholders with “higher worth certainty.”)
Buyers are cautious; will regulators balk?
Warner Brothers buyers are usually not the one viewers that Netflix must win over. The deal should be blessed by antitrust regulators—a prospect whose consequence is more durable to foretell than ever within the Trump administration.
Sarandos and Peters laid out the case Tuesday for why they consider the deal will get by the regulatory course of, framing the deal as a boon for American jobs.
“That is going to permit us to considerably broaden our manufacturing capability within the U.S. and to maintain investing in authentic content material in the long run, which implies extra alternatives for inventive expertise and extra jobs,” Sarandos mentioned.
Referring to Warner Brothers’ tv and movie companies, he added that “these of us have in depth expertise and experience. We would like them to remain on and run these companies. We’re increasing content material creation not collapsing it.”
It’s a compelling story. However the co-CEOs could have uncared for to check an important script of all in the case of getting authorities approval within the present administration; they forgot to recite the Trump traces.
The instance has been set over the previous 12 months by friends corresponding to Nvidia’s Jensen Huang and Meta’s Mark Zuckerberg. The latter, together with his firm dealing with varied federal regulatory threats, started publicly praising the Trump administration on an earnings name final January.
And Nvidia’s Huang has already seen actual dividends from the same technique. The chip firm CEO has praised Trump repeatedly on earnings calls, in media interviews, and in convention keynote speeches, calling him “America’s distinctive benefit” in AI. Since then, the U.S. ban on promoting Nvidia’s H200 AI chips to China has been rescinded. The reward could have been coincidental to the result, but it surely actually didn’t harm.
In distinction, the president went unmentioned on Tuesday’s name. How vital Netflix’s omission of a Trump call-out seems to be stays to be seen; possibly it received’t matter in any respect. Nevertheless it’s price noting that its competitor for Warner Bros., Paramount Skydance, is helmed by David Ellison, an outspoken Trump supporter.
It’s a storyline that Netflix ought to have seen coming, and itmay nonetheless ship the corporate again to rewrite.
