Netflix disappoints investors: spending on content will rise, no share buyback

Shares of streaming service Netflix plunged 5% in extended trading on Tuesday, January 20. The company said it will increase spending on content in 2026, which will hit profits. Netflix also plans to suspend share repurchases to save up to buy Warner Bros. Discovery. At the same time, the report for the fourth quarter exceeded analysts' expectations: the number of subscribers exceeded 325 million, Netflix showed strong growth in advertising revenue.

Shares of streaming service Netflix were down 5.3% to about $82.6 in extended trading Tuesday after the reports were released. In the main trading, the price has not fallen to this level since April 2025.

Investors negatively perceived the message of Netflix about the growth of costs for content production, which is fraught with a reduction in profits, writes Bloomberg. The company announced that it plans to increase spending on movies and TV series by 10% in 2026. In 2025, Netflix spent about $18 billion for these purposes.

Closing the deal with Warner Bros. would incur an additional $275 million in costs in 2026, on top of the $60 million already incurred, causing Netflix to suspend its share repurchase program to save up for the deal, the company said in a letter to shareholders.

Netflix expects earnings of $0.76 per share for the current quarter, below the consensus forecast of $0.82, Bloomberg notes. The forecast for quarterly revenue is $12.2 billion, which matched analysts' expectations.

The company reported that the number of subscribers in the fourth quarter exceeded 325 million. This means a growth of almost 8%, writes Bloomberg. The company has stopped disclosing the exact size of the paying audience since 2025, suggesting that investors focus on financial indicators.

Despite the slowdown in the growth of the number of subscribers, Netflix continues to demonstrate double-digit rates of revenue growth due to higher prices and the development of the advertising model, writes Bloomberg. In the fourth quarter, revenue rose 18% year-over-year to $12.05 billion, with adjusted EPS of $0.56. Wall Street, according to LSEG, expected revenue of $11.97 billion and EPS of $0.55, CNBC writes. Net income rose 29.4% to $2.42 billion.

In 2025, revenue grew by 16% to $45.2 billion. In 2026, the company expects the figure to increase by 14% to $51.7 billion.

Netflix's ad revenue, compared to 2024, has grown 2.5 times (150%) to $1.5 billion. The company plans to raise prices again in 2026 and expects ad revenue to double to more than $3 billion.

By the end of the year, Netflix had a strong programming lineup, including the finale of "Very Strange Things," a documentary series about Sean Combs, known as Puff Daddy, and a new movie about Frankenstein's monster, Bloomberg noted.

Netflix is engaged in an intense battle for the assets of Warner Bros. - 's streaming and studio businesses. On Tuesday, the company said it had renegotiated the terms of the deal: it will now be all-cash - $27.75 per share of WBD stock ($72 billion total), instead of the previously proposed combination of stock and cash. Warner Bros. intends to spin off its cable networks into a separate company in parallel. Buying Warner Bros. will give Netflix access to one of the largest libraries of movies and TV series in the world, which can be used to create new projects.

Paramount Skydance, run by David Ellison, offered $30 per share of WBD stock - also in cash.

This article was AI-translated and verified by a human editor