Netflix (NFLX) is the biggest loser premarket, down around 7% after its quarterly earnings report and uncertainty around its attempt to buy Warner Bros. Discovery (WBD).

Despite beating 4Q estimates with EPS of $0.56 and revenue of $12.1 billion, announcements about improving core offerings, expectations of doubling their ad revenue in 2026, and subscriptions topping 325 million, investors were disappointed by the guidance overall. Netflix projected free cash flow of $11 billion for 2026, along with 13% revenue growth, both below analyst hopes.

Spending remains an issue for the company. Ignoring the WBD deal for now, it must continue to ramp content spending. Its forays into sports face expensive licensing requirements, but Netflix also noted engagement was lower in the second half of 2025 because it licensed less content from other companies. Remember that its most popular show for many years was Friends before Warner Bros. took it back.

Netflix had a lot to say about the potential merger, which has captivated Wall Street for weeks. The company said it would keep 45-day theater release windows for Warner Bros. films and discussed how the addition of HBO Max would allow them to create further user customization.

Now that the deal is meant to be all-cash, Bloomberg reported that banks are selling another $8.2 billion in Netflix debt to fund its bid for WBD. Netflix is also suspending share buybacks as it focuses on getting the money together. Even if the deal closes (shareholders vote in April), it still faces regulatory scrutiny as the streaming space rapidly shrinks.

In the meantime, Netflix also continues to branch out its content: its co-CEO announced TV-based games were seeing an uptick in user engagement. They are also doubling down on live events and even testing podcasts.

Is Netflix out over its skis? The Wall Street Journal argues that raising prices during the WBD deal process would be unwise, opening them to further anticompetitive scrutiny, so that content money has to come from somewhere else.

Multiple analysts have lowered their price targets on the stock this morning but have generally retained positive or neutral ratings. The stock has been generally trending down since June of last year.

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