Company Reports

Netflix's results were good, with sales (up 13% year over year) and operating profit (up 11%) meeting its guidance. The firm maintained its full-year outlook. Netflix also released its first-half 2026 engagement report, but said that it will only release these reports annually beginning in 2027.

Netflix is the leading subscription streaming television platform globally and enjoys the economic benefits of this scale. We expect this position to persist. Netflix did not need Warner Bros., and at the price to which it agreed, we thought it would be value-destructive. However, we do think it needs to move beyond its core business of selling Netflix subscriptions if it wants to reaccelerate growth.

NBCUniversal is one of the premier global media and entertainment firms, and it will likely attract interest from several potential acquirers once it becomes independent. Comcast plans to spin off NBCU by 2027, but tax-related considerations could delay any strategic moves.

Netflix's first-quarter sales and margins exceeded its guidance, and it said the year is tracking its outlook. However, the market likely hoped for increased full-year guidance, given that the March price hikes came as a surprise, ostensibly enabled once the Warner Bros. acquisition fell through.

Netflix announced on March 26 that it's increasing prices across all US plans and tiers.

Netflix is the leading subscription streaming television platform globally and enjoys the economic benefits of this scale. We expect this position to persist. Netflix did not need Warner Bros., and at the price to which it agreed, we thought it would be value-destructive.

After Warner Bros. Discovery deemed Paramount's revised bid for its company as superior to the one it had in place with Netflix, Netflix declined to exercise its right to match. We therefore expect Warner to officially accept Paramount's offer to buy the whole company for $31 per share.

Paramount revised its offer for Warner Bros. Discovery but did not disclose details. Variety reported the offer would likely be for $32 per share, up from $30. Netflix now has four days to respond and may raise its offer of $27.75 per share, which is for only the streaming and studios businesses.

With Netflix's approval, Warner Bros. Discovery has re-engaged in negotiations with Paramount in pursuit of the best deal for shareholders. Talks will remain open through Feb. 23, and Paramount has said that it is willing to improve upon its offer to buy all of Warner for $30 per share in cash.

Netflix's fourth-quarter revenue rose 17% year over year (excluding currency tailwinds). For the full year, revenue also increased 17%, and the operating margin expanded 3 percentage points, to 29.5%. Guidance for 2026 is for 11%-13% organic sales growth and 2 percentage points of margin expansion.

Netflix is the leading streaming television platform globally and enjoys the economic benefits of market-leading scale. We expect this position will persist.

With a tender offer to Warner Bros. Discovery shareholders outstanding, Paramount revised details of its bid but maintained the value: $30 in cash per share. Larry Ellison is now personally guaranteeing the equity financing, and Paramount will pay Warner $5.8 billion if it cannot complete the deal.

Warner Bros. Discovery urged shareholders to reject Paramount's offer to buy their shares for $30 apiece and instead affirm the board's decision to merge only its streaming and studios business with Netflix. Netflix and Warner assert the Netflix bid is superior, while Paramount says the opposite.

Paramount Skydance has offered $30 per share in cash for all of Warner Bros. Discovery, forcing the latter's shareholders to weigh the bid against Netflix's $27.75 cash and stock offer (nearly 85% cash) for the streaming and studios business, which constitutes most of Warner's equity value.

Netflix plans to pay 25 times estimated 2026 EBITDA for Warner Bros.' streaming and studios business, which strikes us as exorbitantly high, even with the premier, unique assets Netflix will acquire. Regulatory approval is highly uncertain.

CNBC reported that Netflix is the leading bidder to acquire Warner Bros. Discovery, and CNBC published a letter that Paramount sent to Warner alleging that Warner is running an unfair process. Paramount is likely bidding for all of Warner, while Netflix is interested only in streaming and studios.

Netflix reported good third-quarter sales, encouraging underlying metrics, and a good fourth-quarter outlook. But a $619 million expense based on gross sales in Brazil for periods dating back to 2022 ("a cost of doing business tax") weighed heavily on profits.

Netflix is the leading streaming television platform globally and enjoys the economic benefits of market-leading scale. We expect this position will persist.

Netflix again posted fantastic results, with second-quarter sales up 16% year over year and the operating margin increasing by 7 percentage points, to 34%. However, sales would have missed guidance if not for a currency tailwind, and lower content expenses, which won't persist, drove profits.

Netflix is the leading streaming television platform globally and enjoys the economic benefits of market-leading scale. We expect this position will persist.