Netflix Stock Tumbles in After-Hours Trading Following Q4 Results and Acquisition Update

Netflix shares experienced significant pressure during after-hours trading following the company’s announcement of fourth-quarter 2025 financial results and changes to its Warner Bros. Discovery acquisition agreement. As of late evening trading, stock prices had declined 4.9% from the regular session closing price of $87.26, signaling investor concern despite the company’s strong operational performance.

Strong Earnings Fail to Offset Strategic Moves

The streaming giant’s financial results actually exceeded market expectations. Netflix reported Q4 2025 revenue of $12.05 billion, outpacing analyst consensus estimates of $11.97 billion, while earnings per share reached $0.56 compared to the anticipated $0.55. Looking forward, management guided 2026 revenue to range between $50.7 billion and $51.7 billion, reflecting projected year-over-year growth of 12% to 14%.

Despite these positive metrics, the market’s reaction turned decidedly negative. The disconnect between strong fundamentals and stock performance underscores how significantly capital allocation decisions can influence investor sentiment.

Buyback Suspension and All-Cash Warner Bros. Deal

The primary driver of the market’s negative response centered on Netflix’s strategic pivot regarding shareholder returns. In its shareholder letter, Netflix announced a suspension of its share repurchase program as the company prioritizes cash accumulation to maintain financial strength during its Warner Bros. Discovery acquisition process.

The acquisition agreement itself underwent material revision. The original transaction structure incorporated both cash and Netflix stock; the amended agreement now provides for an all-cash transaction valued at $27.75 per Warner Bros. Discovery share. This shift represents a significant change in deal structure and underscores the company’s commitment to preserving liquidity throughout the transaction period.

Valuation Perspective: Is This a Buying Opportunity?

From a valuation standpoint, Netflix presents an interesting positioning. The stock currently trades at 39 times operating cash flow, representing a meaningful discount to its five-year average cash flow multiple of 59.2. Historically, such valuation compression has often preceded periods of strong stock performance.

The company’s decision to suspend buybacks, while disappointing to some investors in the near term, reflects prudent financial stewardship. Building a stronger cash position provides Netflix with greater strategic flexibility and reduces financial risk during a major acquisition integration period. Management’s confidence in future growth, as evidenced by robust 2026 revenue guidance, suggests this period of restricted capital returns may prove temporary.

For investors evaluating Netflix at current price levels, the combination of beat financial results, reasonable valuation metrics, and strategic financial positioning warrants careful consideration of the company’s long-term investment merits.