Netflix delivers solid earnings amid Warner Bros. uncertainty

Investors, though, are still deciding how much credit to give that story today. The company didn’t break out margins for the ad tier, and scaling ads at Netflix’s level means real spending — sales teams, technology, measurement, and increasingly, live inventory that advertisers actually want. The long-term upside is obvious. The near-term cost curve is still fuzzy. That tension showed up in the stock.

Subscriber momentum still matters

Netflix crossed 325 million paid memberships this quarter, another reminder that it remains the largest paid streaming platform on the planet by a wide margin. Growth was broad-based, with double-digit revenue increases across regions, and engagement held steady even as the company cycled past the sugar high of its password-sharing crackdown. But at 325 million subscribers, the company can’t just rely on adding users. Netflix will need to extract more value per household — and do so visibly.

The company reported 96 billion hours watched in the second half of 2025, up modestly year over year, driven by stronger viewing of Netflix-branded originals, signaling that Netflix’s content machine is still pulling its weight — and that the service isn’t quietly hollowing out as licensed titles rotate off. But at this scale, “solid” subscriber growth doesn’t move the stock the way it used to. And at the same time, the earnings were candid about the trade-offs. Viewing of non-branded, licensed content declined as Netflix stepped back from strike-era licensing deals. Engagement doesn’t grow automatically; it has to be earned, paid for, and refreshed.

Netflix would prefer that investors talk about monetization per member instead of raw net adds. But Wall Street still wants to talk about both. This quarter showed the engine is intact — but it isn’t accelerating in a way that overwhelms other concerns.

The Warner deal is the shadow over everything

Today’s Netflix earnings call will double as a referendum on the proposed Warner Bros. Discovery transaction. The deal is now all cash, financing is being lined up, and Netflix is already behaving like a company preparing for a balance-sheet-shaping transaction. The company used the shareholder letter to emphasize cash generation — $9.5 billion in free cash flow in 2025, with guidance for about $11 billion in 2026 — and to explain why capital returns are taking a back seat to balance-sheet flexibility. Buybacks are paused. Cash accumulation is the priority. The message is clear: Netflix believes it can afford this behemoth purchase.

What investors are still wrestling with is whether they want it to.

The strategic logic is clear: a deeper library, more IP, more live and unscripted inventory, and a content engine that feeds both subscriptions and ads. The risks are just as obvious: integration complexity, regulatory scrutiny, and the possibility that Netflix is voluntarily stepping into the same corporate sprawl it once used as a cautionary tale.

And that uncertainty is why a clean beat didn’t translate into a clean rally. The quarter worked. The future is louder.

Netflix is asking the market to believe it can be a high-growth streamer, a scaled advertising platform, and a disciplined consolidator — all at once. Tuesday’s numbers show that the case is financially plausible. The stock’s reaction shows that investors still want proof that the ambition won’t dilute the machine.