Netflix Shares Under Pressure from Major Acquisition Proposal

A proposed mega-deal is casting a shadow over Netflix's start to the new year, with investor uncertainty weighing on the stock. The streaming giant's potential $82.7 billion acquisition of Warner Bros.' studio and streaming division represents a significant strategic pivot, introducing new complexity and risk to what was once a more straightforward growth narrative.

Despite the market's focus on the potential transaction, Netflix's core business continues to demonstrate robust health. The company reported a 17% year-over-year revenue increase for the third quarter of 2025 and anticipates similar growth of approximately 17% for Q4 2025. Its global subscriber base now exceeds 300 million paying customers.

Other operational highlights include:
* Advertising Business: Projected to more than double in 2025.
* Content Performance: Stranger Things Season 5, Volume 1 garnered nearly 103 million views in its first four weeks. Seasons 1 through 4 have collectively surpassed 1.2 billion views, underscoring the service's global reach.
* Market Penetration: The company achieved record viewership in both the United States and the United Kingdom during Q3 2025.

This strong operational performance is currently being eclipsed in investor sentiment by the debate surrounding the proposed Warner Bros. acquisition.

Details of the Transformative $82.7 Billion Deal

The transaction, which values Warner Bros. assets at roughly $72 billion in equity and $82.7 billion in enterprise value, would mark a decisive shift away from Netflix's previously focused streaming model.

Key framework details include:
* Expected Closing: Within 12 to 18 months.
* Synergy Target: Annual cost savings of $2 to $3 billion, anticipated from the third year post-closing.
* Earnings Impact: A positive contribution to earnings per share (EPS) is expected beginning in the second year after closing.
* Structural Prerequisite: Warner Bros. Discovery must first spin off its Global Networks business into Discovery Global, a move expected in the third quarter of 2026.

Should investors sell immediately? Or is it worth buying Netflix?

This precondition means the timeline is contingent not only on regulatory approvals but also on internal restructuring at Warner Bros. Discovery, extending a period of uncertainty for shareholders.

Regulatory and Competitive Hurdles Emerge

The path to completion faces potential obstacles. A competing bid from Paramount Skydance has entered the fray. In response, Warner Bros. Discovery publicly referred to this as an "inferior" offer in mid-December and advised its shareholders to support the Netflix agreement.

While Netflix has characterized the rival offer as "fully anticipated" and remains confident in finalizing the deal, significant regulatory scrutiny looms. Antitrust authorities could impose delays or demand concessions, further complicating an already ambitious schedule.

Valuation and a Shifting Risk Profile

Even after recent share price declines, Netflix's valuation remains elevated. The stock trades at a price-to-earnings (P/E) ratio of 38, with a forward P/E of 29. Management has guided for diluted earnings per share of $5.45 for the fourth quarter of 2025, following $5.40 in Q3 2024. The company is scheduled to report its Q4 2025 results on January 20.

The prospective acquisition fundamentally alters Netflix's investment profile. The narrative is shifting from one centered on streaming scale, engagement growth, margin improvement, and rising free cash flow to a far more complex story laden with integration challenges and regulatory risk.

As long as the deal remains pending for the next 12 to 18 months, this overhang is likely to persist as a central pressure point for the equity, regardless of the near-term strength of the underlying business.