Netflix's Q4 earnings show EPS of 56 cents, revenue of $12.05 billion (beating estimates), and free cash flow of $1.87 billion (exceeding estimates). However, Q1 operating income guidance ($3.91 billion vs. $4.18 billion estimated) and operating margins (32.1% vs. 34.4% estimated) were light, causing the stock to fall initially by 3-4% in after-hours trading. Full-year 2026 revenue guidance is between $50.7 billion and $51.7 billion.

The analyst confirms Q4 numbers were solid but Q1 guidance is light, particularly regarding operating margins (31% range vs. 32-33% consensus). Questions remain about rising operating expenses or the impact of the Brazil tax. The stock has been down 30% since the last report due to concerns about Netflix's growth trajectory and fundamentals.

The main concern for Netflix is engagement. While Q4 numbers like revenue and operating margins look good, the bigger question is for 2026. This includes the possibility of price increases amidst regulatory scrutiny and the growth catalyst of advertising revenue, which Netflix expects to double in 2026 compared to 2025.

2025 was a strong year for Netflix content with titles like Stranger Things and Squid Game. While 2026 has returning titles like The Diplomat and Bridgerton, the slate isn't as blockbuster. Netflix is making a significant bet on sports content in 2026, exemplified by the successful NFL Christmas Day games, which generated huge viewership numbers.

Netflix sweetened its bid for Warner Bros. Discovery with an all-cash agreement to add financial certainty for investors and speed up the shareholder vote to April. This move puts pressure on Paramount to respond. Regarding regulatory approval, in the US, regulators might give leeway as Netflix argues it competes with platforms like YouTube and TikTok. However, antitrust risks are higher in European markets due to Netflix's concentration there, making approval a market-by-market and potentially long process.