By Anietie Anii-Bassey
Netflix closed out the past year with another strong financial showing, delivering profits and revenue that exceeded Wall Street expectations even as a noticeable slowdown in subscriber growth raised fresh concerns about the company’s long-term expansion.
The mixed results underscored the strategic importance of Netflix’s $72 billion bid to acquire Warner Bros. Discovery’s movie studio and integrate HBO Max into its streaming platform, a deal that has become central to the company’s future ambitions.
The company reported fourth-quarter results Tuesday that beat analyst forecasts, buoyed by higher revenue and improved profitability. Netflix said it earned $2.4 billion during the quarter, or 56 cents per share, representing a 29% increase from the same period a year earlier.
Revenue climbed 18% year over year to more than $12 billion, reflecting higher subscription fees in several markets and continued advertising growth.
Despite the strong financial performance, Netflix acknowledged that subscriber growth has slowed significantly. The company ended the year with more than 325 million subscribers worldwide, indicating it added roughly 23 million customers over the course of the year.
While still a sizable increase, it marked a sharp deceleration from the 41 million subscribers Netflix added the previous year.
The slowdown has heightened investor concerns that Netflix’s rapid expansion phase may be nearing its end. Much of the growth surge in 2024 followed the rollout of the company’s lower-priced, advertising-supported plan, which attracted millions of cost-conscious viewers.
With that boost now fading, analysts are increasingly focused on whether Netflix can sustain momentum in a maturing and highly competitive streaming market.
Management also tempered expectations for the start of the new year, forecasting profits for the January through March period that fell short of analyst estimates. Netflix further announced it would suspend share buybacks as it prioritizes financial flexibility while pursuing the Warner Bros. Discovery acquisition.
“Overall, this points to a challenging start to the year,” said Thomas Monteiro, an analyst at Investing.com, noting that investor sentiment is likely to remain cautious as the company balances slowing growth with a complex and expensive acquisition.
Netflix shares fell about 5% in extended trading following the earnings announcement, despite the better-than-expected quarterly results.
The reaction reflected investor unease over both the company’s near-term outlook and the uncertainty surrounding the proposed deal with Warner Bros. Discovery.
The earnings report was largely overshadowed by developments in Netflix’s ongoing bidding battle for Warner Bros. Discovery, which has become one of the most closely watched corporate showdowns in the media industry.
Earlier Tuesday, Netflix modified its original proposal, replacing a mixed cash-and-stock offer with an all-cash bid in an effort to streamline the transaction and make it more attractive to Warner Bros. Discovery shareholders.
The move was widely viewed as an attempt to fend off rival interest from Paramount, which has continued to pursue Warner Bros. Discovery and has shown no sign of backing away from the contest.
While Warner Bros. Discovery has reiterated its preference for the Netflix deal, Paramount could still raise its offer, intensifying pressure on both Netflix and Warner Bros. leadership.
Beyond the competitive bidding, Netflix faces potential regulatory scrutiny. The company will need to convince U.S. regulators that folding HBO into the nation’s largest streaming service would not reduce competition or lead to higher prices in an industry where subscription costs have already been climbing. Antitrust concerns could further complicate or delay the transaction.
Investor anxiety surrounding these issues has already taken a toll on Netflix’s stock. Shares have fallen roughly 20% since the agreement with Warner Bros. Discovery was announced last month, reflecting uncertainty over whether the deal will close and what its long-term financial impact will be.
That uncertainty is expected to linger for much of the year. Netflix has said it does not anticipate completing the acquisition until Warner Bros. Discovery completes the spin-off of its cable television business, a process projected to take between six and nine months.
Until then, Netflix will be navigating a period defined by strong current profits, slowing subscriber growth, and the high-risk bet that a blockbuster acquisition can secure its dominance in the evolving streaming landscape.
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