Netflix shares fall as guidance disappoints

(Image credit: Igor Golovniov/SOPA Images/LightRocket via Getty Images)

Shares in streaming giant Netflix fell approximately 6% overnight following an earnings report that delivered on the fundamentals but left investors pessimistic over the future outlook.

Netflix (NASDAQ:NFLX) shares were once counted among the world’s top stocks during the ‘FAANG’ days, but in recent years it has played second fiddle to the new formulation of the Magnificent Seven. Netflix stocks fell out of favour post-pandemic as the end of lockdown conditions posed a headwind for businesses associated with the stay-home economy.

The company is also viewed as less central to the artificial intelligence (AI) boom that is currently dictating stock market sentiment compared to US big tech stocks such as Nvidia.

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Since then, markets have been unconvinced about Netflix. Shares gained 5.2% through 2025, trailing the S&P 500 by some distance through the year.

In mid-November, Netflix shares peaked at $115, up 30% for the year.

But the rally was reversed when investors appeared to sour on the company’s plans to acquire film studio Warner Bros. Discovery (NASDAQ:WBD) (WBD).

“Splashing out so much cash was never going to make the share price jump with delight,” said Danni Hewson, head of financial analysis at AJ Bell.

Shares in Netflix fell 3% on 5 December following its announcement of the plan to buy WBD.

Netflix earnings impress, but guidance leaves investors cold

The latest dent to Netflix’s shares follows its Q4 earnings release on 20 January.

Netflix delivered $45.2 billion revenue during the quarter, up 17.6% year-on-year. Net income – which included approximately $60 million in costs related to financing the WBD acquisition – rose 29% to $2.4 billion, resulting in earnings per share rising 30% to $0.56.

“Revenues, margins and profits all beat expectations, but markets don’t dwell on the rear‑view mirror for long,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “The issue was guidance.”

Specifically, the outlook for Netflix’s profitability undershot market expectations. Netflix expects its net margin to be 31.5% in 2026, above the 29.5% it achieved in 2025 but, crucially, below the 32.6% that analysts had anticipated.

“Content spend is doing the damage, a timely reminder that even streaming’s gold standard can’t afford to take its foot off the creative gas,” said Britzman.

Is Netflix stock a buy?

On average, analysts expect Netflix to post solid gains over the coming 12 months.

The consensus 12 month price target among analysts polled by data provider LSEG (London Stock Exchange Group) is $120, implying around 37.5% growth from Netflix’s 20 January close price.

Netflix stock isn’t cheap: it trades at around 27 times expected earnings and 34 times trailing earnings (as of 20 January). It will have to keep consistently growing its earnings and profitability if it is to justify this valuation.

Investors considering investing in Netflix should conduct thorough research and consider the risks involved carefully before doing so.

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Dan is a financial journalist who, prior to joining MoneyWeek, spent five years writing for OPTO, an investment magazine focused on growth and technology stocks, ETFs and thematic investing.

Before becoming a writer, Dan spent six years working in talent acquisition in the tech sector, including for credit scoring start-up ClearScore where he first developed an interest in personal finance.

Dan studied Social Anthropology and Management at Sidney Sussex College and the Judge Business School, Cambridge University. Outside finance, he also enjoys travel writing, and has edited two published travel books.