The latest quarter from Netflix (NFLX) left Wall Street wanting more, and not just on the earnings front.
Shares of Netflix tanked 6% in premarket trading on Wednesday as its initial outlook for 2026 fell shy of analyst forecasts. Netflix sees 2026 sales growth of 12% to 14%, short of the “whisper numbers” of 16% that circulated ahead of the report.
The company also earmarked $275 million in costs related to the $72 billion acquisition of Warner Bros. Discovery (WBD), impacting operating margin potential.
Adding to the list of concerns, Netflix said viewing hours in the second half of 2025 only increased 2% — well below the full year growth rate of 9%. Moreover, with 325 million subscribers, Netflix trailed some analyst estimates on this key metric.
“We remain concerned that short-form entertainment (such as TikTok, Insta, X, YouTube shorts and Snap) is doing to streaming what streaming has done to traditional TV as consumers (especially younger ones) spend an ever increasing time on these platforms amidst plummeting attention spans,” said Guggenheim analyst Jeff Wlodarczak.
He noted this shift is “fundamentally negative for long-form content.”
Wlodarczak added that he remains concerned the bidding war for WBD between Netflix and Paramount is not over, and that the “expensive” deal could prove to be a distraction as content competition intensifies.
He isn’t alone on the Street in his worries regarding Netflix’s former growth trajectory.
“We believe nuances around engagement, incremental investment, and uncertainty on Warner are likely to weigh on the stock NT,” KeyBanc analyst Justin Patterson said.
On the earnings call, Netflix co-CEO Ted Sarandos revealed his thinking behind the splashy $72 billion deal for Warner Bros. While the explanation was likely welcomed by the Street, it fell well short of providing important details on integration planning and the ultimate financial impact of acquiring such a massive legacy media asset.
In short, the call did little to alleviate investor concerns regarding Netflix’s shares in 2026.
On the earnings call, Netflix co-CEO Ted Sarandos defended the $72 billion Warner Bros. Discovery acquisition as a necessary evolution in a “blurred” media landscape.
Sarandos on the people at Warner Bros. that he needs:
“We’re confident we’re going to be able to secure all the approvals because this deal is pro-consumer, it is pro-innovation, it’s pro-worker, it is pro-creator and it is pro-growth. Warner Bros., as we just said earlier, it’s got three core businesses that we don’t currently have. So we’re going to need those teams. These folks have extensive experience and expertise. We want them to stay on and run those businesses. So we’re expanding content creation, not collapsing it. In this transaction, this is going to allow us to significantly expand our production capacity in the U.S. and to keep investing in original content over the long term, which means more opportunities for creative talent and more jobs. This is really a vertical deal for us. It allows us to gain access to 100 years of Warner Bros. deep content and IP for development and distribution in more effective ways that will benefit consumers and the industry as a whole. HBO, as Greg [co-CEO Greg Peters] just mentioned, is a very complementary service to ours. And the TV market is extremely dynamic and very competitive. So the TV landscape, in fact, has never been more competitive than it is today. There’s never been more competition for creators, for consumer attention, for advertising and subscription dollars.