On Netflix’s earnings call, co-CEOs can’t quell fears about the Warner Bros. bid
When it comes to creating irresistible stories, Netflix is home Strange things and The crownsecond to none. As the streaming video giant filed its quarterly earnings report on Tuesday, executives were on top form, showcasing what they promise will be a smash hit: the acquisition of Warner Brothers Discovery.
The deal, which values Warner Brothers Discovery at $83 billion, will accelerate its core streaming business while helping it expand into its theatrical TV and film businesses, the company’s co-CEOs Ted Sarandos and Greg Peters said.
“This is an exciting time in the business. A lot of innovation, a lot of competition,” Sarandos enthused on an earnings conference call Tuesday. Netflix has a history of both successful transformation and opportunistic transformation, as it reminded the audience: Once upon a time, its core business entailed mailing DVDs in red envelopes to customers’ homes.
Despite Sarandos’ confident delivery, the pitch didn’t land with investors. The company’s stock, already down 15% since Netflix announced the deal in early December, fell another 4.9% in after-hours trading on Tuesday.
Netflix’s financial results for the fourth quarter of 2025 were good. The company beat EPS expectations by 1 cent, and said it now has 325 million paid subscribers and a total global audience approaching 1 billion people. Its revenue forecast for 2026, between $50.7 billion and $51.7 billion, was on target.
However, investors are concerned that the Warner Bros. deal… It will force Netflix’s competition out of the way, causing management to lose focus. The fact that Netflix will temporarily halt its stock buybacks in order to raise cash to help fund the deal, as revealed at the bottom of its shareholder letter on Tuesday, probably didn’t help matters.
Given that Warner Bros. has a competing bid from Paramount Skydance, it’s not unreasonable for investors to be concerned that Netflix may have to enter into an expensive bidding war. (Although Warner Brothers Discovery accepted Netflix’s offer instead of Paramount’s, no one thinks the story is over — not even Netflix, which updated its $27.75 per share offer to all cash, rather than stock and cash, hours before Tuesday in order to provide WBD shareholders with “greater certainty of value.”)
Investors are cautious. Will the organizers refuse?
Warner Brothers investors aren’t the only audience Netflix needs to win over. This deal must have the blessing of antitrust regulators, a prospect whose outcome is more difficult to predict than at any time during the Trump administration.
Sarandos and Peters laid out the argument Tuesday for why they believe the deal will pass through the regulatory process, positioning the deal as a boon for American jobs.
“This will allow us to significantly expand our production capacity in the US and continue investing in original content over the long term, which means more opportunities for creative talent and more jobs,” Sarandos said.
Referring to Warner Bros.’ television and film businesses, he added, “These people have a wealth of experience and expertise. We want them to stay and run those businesses. We are working to expand content creation, not collapse it.”
It’s a compelling story. But the CEOs involved may have neglected to consider the most important scenario of all when it comes to getting government approval in the current administration; They forgot to read Trump’s lines.
The example has been set over the past 12 months by peers like Nvidia’s Jensen Huang and Meta’s Mark Zuckerberg. The latter, whose company faces multiple federal regulatory threats, began publicly praising the Trump administration on an earnings call last January.
Nvidia’s Huang has already seen real profits from a similar strategy. The chip company’s CEO has repeatedly praised Trump on earnings calls, in media interviews, and in keynote speeches at conferences, calling him “America’s unique advantage” in artificial intelligence. Since then, the US ban on the sale of Nvidia H200 AI chips to China has been overturned. The praise may have been a coincidence of the result, but it certainly didn’t hurt.
In contrast, the president was not mentioned in Tuesday’s call. How significant is Netflix’s omission of Trump’s call? It remains to be seen; Maybe it won’t matter at all. But it’s worth noting that its Warner Bros. competitor, Paramount Skydance, is headed by David Ellison, an outspoken Trump supporter.
It’s a story that Netflix should have seen coming, and one that could still have the company rewriting.
2026-01-21 02:15:00
