Netflix Earnings Offer Investors a Glimpse Beyond Battle for Warner Bros.

Netflix reports after markets close today under a shadow bigger than the Mind Flayer’s. The streaming giant’s ongoing attempt to acquire Warner Bros. Discovery is sucking the life force out of its stock, but analysts are mostly hitting “Continue Watching,” regardless of the deal’s outcome.

The Stranger Things streamer’s stock has fallen nearly 30% over the past few months, initially dropping after its October earnings report surprised investors with a Brazilian tax kerfuffle. The slide continued this month as Netflix duked it out with Paramount Skydance for control of Warner. 

But today could give investors a case for scooting back a few feet from their screens to see the whole picture: Visible Alpha estimated that Netflix could report revenue grew 17% in the holiday quarter. 

Pressing Play to Its Strengths 

Netflix is a content powerhouse even without HBO Max’s Heated Rivalry. Hits like Guillermo Del Toro’s critically acclaimed Frankenstein and the slightly less high-brow Jake Paul boxing match are expected to have juiced subscriber signups in the fourth quarter. But Netflix isn’t chilling:

• As a pure-play streamer that can’t fall back on, for instance, theme parks for its revenue, content is everything for Netflix. And before taking on Warner Bros. Discovery, the streamer’s shoring up its strengths. After finding success with live sporting events like its Christmas Day NFL game, Netflix doubled down this month on its partnership as the home of WWE shows like Wrestlemania. Investors will also want to see how it builds on the success of franchises like Stranger Things and Bridgerton (spinoff shows, Regency-esque balls and so on). 
• At the same time it tries to attract and retain subscribers, Netflix is also squeezing more money out of their binge seshes. The streamer’s ad sales hit an all-time high last quarter, and that momentum’s likely to continue as more subscribers opt for ad-supported viewing. Wedbush analyst Alicia Reese expects advertising to become Netflix’s top source of revenue this year.

No Pause Button: The tug-of-war to win Warner Bros. Discovery could drag on for months, and investors want to know how Netflix will keep the cameras rolling in the meantime. If Netflix does secure the deal, how the streamer sticks to its strengths while absorbing a new company will be a concern and not just from an antitrust standpoint. Netflix is already the world’s largest streaming service, with more than 300 million subscribers, and folding in HBO Max would tack on another ~120 million subs.