Netflix after earnings: a strong quarter, a more expensive 2026

For newer investors, this is a useful lesson. The share price is a vote on the next 12 months, not a reward for the last 12 weeks.

The quarter: the machine keeps running

Netflix’s fourth quarter supports the “upgrade” narrative it has been pushing. It still grows, but it increasingly behaves like a mature business, focusing on margins, efficiency, and cash.

Scale remains a strength. Netflix passes another milestone in paid memberships, which matters because scale is not just bragging rights. It lowers unit costs, improves bargaining power, and gives Netflix more room to test new products without putting the core subscription engine at risk.

Engagement holds up too. Netflix points to steady viewing in the second half of 2025, with Netflix originals doing more of the heavy lifting. In streaming, steady engagement is what makes pricing power possible. If people use the service often, they are less likely to cancel after a price change, and advertisers are more willing to pay for attention.

The guide: profits do not vanish, they get postponed

The market’s unease is not really about what Netflix just delivered. It is about what Netflix chooses to do next.

Management signals higher spending in 2026, with the impact felt earlier in the year and benefits skewing later. Translation: the company pulls forward investment, which can pressure near-term margins even if revenue keeps growing. Netflix frames this as timing, not deterioration.

In other words, Netflix does not say the business model breaks. It says it is leaning into growth and content, and it is asking investors to accept a bumpier profit path in exchange for a bigger long-term opportunity.

The bigger plot twist: Warner, buybacks, and the cash priority

The other reason the market focuses on guidance is the Warner Bros deal.

Netflix says it is working to close its acquisition of Warner Bros, and Reuters reports the company plans to pause share buybacks to accumulate cash to fund the pending acquisition. That is a meaningful capital allocation change. Buybacks can support earnings per share and signal confidence. Pausing them signals something else: cash becomes more valuable than short-term share count reduction.

If you strip the headlines away, the logic is straightforward. A major acquisition is not just a content library. It is integration work, financing costs, and a different cadence of spending. Netflix even notes acquisition-related expenses in its margin outlook.

Investors should treat this as a new phase of the Netflix story. The past phase is “streaming wins, margins expand.” The next phase looks more like “streaming consolidates, content scale expands, and the margin path gets bumpier.”

Netflix still expects ad revenue to roughly double in 2026 versus 2025. Reuters reports Netflix’s Chief Financial Officer says advertising revenue could reach about 3 billion USD in 2026. That is the second engine Netflix wants: subscriptions plus advertising, earning more from the same viewer.

But building an ad business takes time. It needs measurement tools, formats, sales teams, and credibility with brands. In the short run, it can lift revenue and still pressure margins.

Risks: what could break the story

The first risk is integration and execution risk around Warner. Deals look clean on slides and messy in real life. Watch for changing timelines, rising one-off costs, or vague language about how quickly synergies arrive.

The second risk is content cost inflation. A larger library helps, but new hits still cost money. If spending rises faster than viewing value, margins can disappoint even with revenue growth.

The third risk is advertising cyclicality. If the ad market weakens, Netflix can still grow audiences but monetise them less effectively. Early warning signs often show up as softer ad pricing, slower ad growth, or a shift toward more cautious wording.

Investor playbook: a simple post-earnings checklist

• If Netflix keeps emphasising average revenue per user (ARPU), treat it as a signal the focus stays on monetisation quality.

• If ad growth comes with specific indicators, track whether it gradually supports margins, not just revenue.

• If Warner updates move from “intent” to clear integration milestones, expect the market to reward clarity more than ambition.

• If churn rises after pricing changes, treat that as the earliest stress test of pricing power.

The queue is nice, the basket pays the bills

Netflix still knows how to pull a crowd. Q4 proves the core machine works: revenue grows, profit rises, cash flow holds up, and memberships clear 325 million.

But the market does not clap for what already happened. It prices what happens next. Netflix chooses to spend more, build faster, and pursue Warner, even if that nudges near-term profitability below what analysts pencilled in. In a way, this is the same Netflix decision investors have seen before, just with a bigger receipt.

For long-term investors, the point is not whether one quarter beats consensus. The point is whether the business keeps raising value per viewer, without losing trust. The queue outside is flattering. The basket at the checkout is what compounds.

This material is marketing content and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.

The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options.