Netflix down 5% after Q4 results 📉 Is Wall Street turning bearish?

What did Netflix show?

Wall Street is starting to judge the company not on whether it is growing, but on whether it is growing perfectly. The print confirms that Netflix’s business model is still working and that monetization of its customer base remains above average. By the end of 2025, Netflix is estimated to have surpassed 325 million subscribers, implying nearly 8% year-on-year growth.

• Even though the company has been moving away from regularly reporting subscriber figures, it’s hard to ignore that the ecosystem is still expanding. Yet that same scale raises the bar: the bigger Netflix gets, the less room there is for “good” to be good enough. The biggest issue this time? Guidance.
• For the current quarter, Netflix expects EPS of $0.76, below market expectations of roughly $0.82. Revenue is projected at $12.2 billion, essentially in line with consensus. But Netflix is no longer a “regular” stock—at roughly 30x forward 12-month earnings, any outlook that merely meets expectations is read as a lack of upside surprise. And at elevated valuations, no surprise can trade like a negative surprise.
• Netflix also said it will increase content spending by 10% in 2026, after allocating roughly $18 billion to programming in 2025. The message is clear: the fight for viewer time and “share of attention” isn’t easing, and the content investment cycle is turning up again. That’s great for users, but the market is less enthusiastic.

Investors have grown used to Netflix expanding revenue faster than costs and rebuilding margins. This guidance suggests 2026 could be a year when margin improvement slows because the company is deliberately leaning back into heavier investment. At this stage of the cycle, that’s exactly the kind of shift that prompts profit-taking.

Another key overhang is the potential acquisition of Warner Bros. Discovery’s assets—specifically the studio and streaming business. Netflix is explicit: closing the deal would add $275 million of costs this year, on top of the $60 million already incurred. Importantly, the company also signaled it would pause share buybacks to build cash for the transaction.

That kind of signal always lands heavily on Wall Street. When buybacks disappear, the market immediately asks: will the balance sheet become tighter? Will the ROI on the acquisition be high enough? Strategically, Netflix wants Warner Bros. in order to:

• secure one of the largest and strongest film/TV libraries in the world,

• use the IP for new formats and sequels,

• expand adjacent businesses such as consumer products and gaming.

This isn’t a “two-year” purchase—it’s a “decade” purchase. But markets typically don’t like paying upfront for vision until they see hard numbers in the model.

Netflix is entering a phase where “a good quarter is the minimum.” The company has recently raised prices, scaled its ad business, and stopped treating subscriptions as the only growth engine. Netflix remains an outstanding company—yet sentiment is shifting around its valuation.

The next few months will come down to three things:

1. Can Netflix sustain ad momentum? The company expects advertising revenue could double in 2026 (from roughly $1.5 billion in 2025). If that path holds, some margin concerns may fade over time.

2. Will higher content spend translate into higher engagement? Netflix has already seen that spending doesn’t always convert proportionally into viewership—engagement growth in the second half of the year was marginal. This will be a hard test of the strategy.

3. Warner Bros. synergies: the market will want a clear, quantified synergy story—not just a strategic narrative.