Netflix sinks on lower-than-expected earnings forecast

Shares of streaming giant Netflix are down more than 4% in after-hours trading on Tuesday following the release of its fourth-quarter and full-year earnings report.

Netflix issued earnings guidance of $0.76 per share for the first quarter of 2026, below the $0.80 per share expected by Wall Street analysts polled by FactSet. The streamer expects an operating margin of 32.1% for the quarter, up from 31.7% in the same quarter of 2025.

For the full year, Netflix issued revenue guidance of $50.7 billion to $51.7 billion — with a midpoint slightly ahead of Wall Street’s $51 billion estimate.

For the quarter ended in December, the streamer posted adjusted earnings of $0.56 per share, slightly below FactSet estimates of $0.57. The company reported revenue of $12.05 billion, beating estimates of $11.97 billion and Netflix’s own forecast of $11.96 billion.

For every $1 of revenue Netflix booked last year, the streamer put $0.38 into creating or acquiring new shows or movies. That’s a significant shift from its content reinvestment habits a decade ago, when the recently wrapped “Stranger Things” had first debuted.

In absolute values, Netflix is investing more into content; it’s just making more money, too. Lucrative ad-supported tiers have boosted the company’s sales figures, with ad revenue growing to more than $1.5 billion in 2025.

Investors are likely awaiting further details on Netflix’s effort to acquire the streaming and studio assets of Warner Bros. Discovery on its Tuesday evening earnings call. WBD has repeatedly backed Netflix’s $83 billion offer while rejecting a $30-per-share bid by Paramount Skydance.

Earlier on Tuesday, Netflix further boosted its chances by amending its offer to be all-cash — a welcome development for WBD investors given Netflix’s stock decline after the earnings report. Still, the deal may face regulator scrutiny amid fierce opposition within the entertainment industry and Congress.

In its filing on Tuesday, Netflix said acquiring WBD’s HBO Max would allow it to “offer more personalized and flexible subscription options, better meeting the diverse preferences of our global audience.”

As the Warner Bros. bidding war has intensified, event contracts focused on the future owner of the HBO parent company have begun to swing heavily in favor of Netflix. As of market close Tuesday, Netflix’s odds have climbed to 71%, compared to Paramount’s 16%. (Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.)

Still, investors don’t appear obsessed with the idea of Netflix leading entertainment consolidation. Since the streamer’s deal for WBD was announced on December 5, its shares have dropped 13% as of Tuesday’s close.