Netflix earnings top estimates but stock slips on ‘elevated expectations’
Netflix just posted a solid fourth-quarter earnings report — yet its stock still dipped. If that sounds confusing, you’re not alone. Let’s break down what really happened, why Wall Street wasn’t fully impressed, and what it means for Netflix investors going forward.
Netflix Earnings at a Glance (Quick Snapshot)
- Revenue: $12.05 billion (up 17.6% year-over-year)
- Net Income: $2.42 billion (up 29% YoY)
- Operating Margin: 24.5% (up from 22.2% last year)
- Free Cash Flow: $1.87 billion (up 36% YoY)
- Paid Memberships: Over 325 million globally
On paper, Netflix beat expectations across most key metrics. So why did the stock fall about 4%?
Why Netflix Stock Fell Despite an Earnings Beat
1. Valuation Was Already High
Netflix shares had rallied strongly before earnings. When a stock is priced for perfection, even good news can trigger profit-taking. Investors expected more upside surprises — and didn’t quite get them.
2. Warner Bros. Discovery Deal Added Uncertainty
The bigger headline wasn’t just earnings — it was Netflix’s amended acquisition offer for Warner Bros. Discovery (WBD).
- Netflix proposed an all-cash offer of $27.75 per share for Warner Bros. studios and streaming assets
- Paramount Skydance countered with a $30-per-share bid for the entire WBD business
While Netflix highlighted strategic benefits, investors are still weighing:
- Integration risks
- Deal complexity
- Long-term financial impact
Uncertainty tends to make markets nervous — especially in the short term.
Content Is Still Netflix’s Biggest Strength
Netflix made it clear: engagement remains strong.
- Viewers watched 96 billion hours in the second half of 2025
- Growth accelerated compared to the first half of the year
Big branded hits like Stranger Things, Knives Out, Guillermo del Toro’s Frankenstein, and A House of Dynamite helped drive those numbers.
That said, Netflix admitted that non-branded viewing declined, mainly due to fewer licensed titles. This reinforces Netflix’s increasing dependence on original content.
Cash Flow: Strong, But Down Sequentially
From a financial health perspective, Netflix is still in a good spot.
- Operating cash flow: $2.11 billion (up sharply YoY)
- Free cash flow: $1.87 billion (up YoY, but down from last quarter)
The quarterly dip isn’t alarming on its own, but it does remind investors that cash flow can fluctuate based on content spending and timing.
Analyst Take: Solid Business, Near-Term Caution
According to analysts, the post-earnings dip likely reflects a mix of:
- Rich valuation
- Margin expansion being weighted more toward the back half of 2026
- Uncertainty around the Warner Bros. acquisition
In short, Netflix is executing well — but expectations are extremely high.
Netflix 2026 Guidance: What to Watch
Netflix’s outlook for 2026 was largely in line with Wall Street estimates:
- Revenue forecast: $50.7B–$51.7B
- Operating margin target: 31.5% (up from 29.5% in 2025)
- Ad revenue: Expected to roughly double vs. 2025
Management also signaled there’s still “plenty of room” to expand margins over time, even after accounting for acquisition-related costs and rising content amortization.
Bottom Line: Is Netflix Still a Long-Term Winner?
Netflix remains a global streaming leader with:
- Massive scale
- Strong content engine
- Growing ad-supported revenue
The stock’s short-term dip reflects valuation pressure and deal-related uncertainty, not a breakdown in the business itself. For long-term investors, execution on content, advertising growth, and disciplined capital allocation will be the real story to watch in 2026.
Key Takeaways (Featured Snippet Ready)
- Netflix beat Q4 earnings expectations, but the stock fell due to valuation and acquisition concerns
- Revenue grew 17.6% year-over-year, with strong margins and cash flow
- Engagement remains high, driven by blockbuster original content
- The Warner Bros. Discovery bid adds strategic upside but near-term uncertainty
- 2026 guidance points to steady growth and expanding margins
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